Conservatives – Page 5 – thinking liberal

And into the general election

MPs here in Britain have just agreed a General Election on 12 December. I will be much more closely involved in this election than normal, as I am agent for the Liberal Democrats in Battersea, a seat that has become highly winnable for the party. Since I do not use this blog to spout party propaganda, it will be very hard for me to post much of interest on this blog in the meantime. So there will be a period of silence.

Is an election the right thing? The government does not have a majority and it is hard to see it getting significant legislation through. This is one way of trying to resolve that, though it may not. Each party has approached the election decision with their short term advantage primarily in mind (and all four main parties played a role). There are two main reasons not to, apart from the inconvenience of the time of year. On the government side many reckoned it was feasible to push through Brexit legislation, now that many Labour MPs are softening, and this would turn an election into a victory parade. On the opposition side there was a chance that this legislation might be changed to allow a further Brexit referendum, which many feel would be desirable before an election. Depending on which of these arguments you accept or reject, the election makes Brexit more or less likely to go through. I have no opinion on this.

All three main parties in England (Scottish politics is very different, and I am much less informed; Wales follows broadly similar trends to England) plan to put Brexit at the centre of their campaigns, alongside other arguments, depending on who they are talking to. The Conservatives will say “Get Brexit Done” to Brexit supporters and “Stop Corbyn” to others. Labour will say “Labour is the only Remain option” to Remain supporters, as our local Labour MP is telling us here in Battersea, and “reject Austerity” to others. The Lib Dems will also lay claim to Remain supporters, with its less equivocal stance, while presenting themselves as the only sensible party left now that Labour and the Conservatives have veered off to idealistic extremes.

How will it play out? Many voters are utterly disgusted with both Labour and Tory leaderships, and will be tempted vote Lib Dem. That is why the party is, astonishingly, in contention in places like Battersea, after generations in the desert. Will they be ground down by a relentless focus on “the two main parties” in the media, as happened at the last election, in 2017? The party starts in a much stronger position, in polling, money and organisational strength than in 2017, or 2015, come to that, so it should do better. But it seeks a radical lift-off in its performance. That is harder. There is evidence that Labour have been making some headway with their pro-Remain message since the party conferences, eating into Lib Dem support. That will come at a cost, though, as anti-Brexit parties eat into Labour support, for which there is also evidence.

The critical factor will be how the Labour leader Jeremy Corbyn and his team goes down with the public. His supporters point to a spectacular performance in 2017 once he hit the campaign trail. But that was in a very different situation. There are problems with Labour’s stance on Brexit if you start to press it, especially around their idea of renegotiating the exit deal, and then recommending its rejection in a referendum. But since the Lib Dems adopted their revoke without referendum policy (albeit only if they are in majority), Labour can present their policy as more moderate and democratic. I actually find Labour spokesmen a bit clearer on the details of their Brexit policy than Lib Dem ones.

But the main question about Labour is over the rest of their policy. Their manifesto is sure to be radical, though how many of the party’s preferred policies (like taking over private schools) make it there is uncertain. Personally I think current Labour policy is horrific, full of the worst ideas from the left. Their plans to nationalise railways and other industries, and roll back public sector outsourcing look like a sop to unions that will get bogged down very quickly. The idea of a “National Education Service” is doubtless meant to evince the warm glow that the National Health Service supposedly does, but in me it evokes the worst aspects of the NHS, politicisation, leaden management and useless user interfaces, for example, and not the good bits. And on top of that Labour’s leadership looks inexperienced on not up to executing such a radical platform successfully. If there were no Lib Dem option it I would sooner support the Conservatives, notwithstanding Brexit. But I am a creature of my class and age (I remember the 1970s); others could react very differently.

And what of the Conservatives’ non-Brexit stance? This mainly seems to be based on scaring people about Labour policies, but they are also trying to reassure people that they will provide more funding for popular public services, such as the police, the NHS and education. Clearly things have moved on from the period of uber-austerity from 2015 to 2018, but it is hard to trust them. That may not matter too much as the much of the public distrusts liberal public spending, unless it benefits them personally, which it mostly doesn’t. Arguments about Keynesian economic stimulus benefiting all tend not to cut ice, rightly or wrongly.

How will The Brexit Party do? TBP was rampant in the European elections in May, and present a tempting proposition to angry Brexiteers, of whom there are many. The usual view is that they will spit the anti-Brexit vote and impede the Conservatives. But the new Tory leadership under Boris Johnson, has done much to contain that threat. The fact that Mr Johnson has not kept his promise to implement Brexit on 31 October “do or die” may not help TBP as much as many thought. I expect few people believed him in the first place, and there are ready scapegoats. TBP might prove just as much a problem for Labour, and their very public leaning towards opposing Brexit.

And the Greens? They may benefit from an electoral pact with the Lib Dems and Plaid Cymru, but it is hard to see them having a major impact. Labour has pretty much shot their fox. Environmental issues certainly have more traction than they used to, but politicians from all parties have noticed. Labour in particular are trying hard to scoop up the angry young environmentalists.

It is all very hard to predict. If Labour start to do well, Tory scare tactics will gain traction and the Lib Dems will suffer. If Labour get stuck, the reverse could happen. Most people think that the SNP will do well in Scotland at the expense of both Conservatives and Labour, though the Lib Dems could make some limited progress there. It will be interesting to see how well the Democratic Unionist Party will do in Northern Ireland, after their very prominent role in this parliament. The betting markets show a Conservative victory and a hung parliament as nearly equally probable at about 45%, with the former having an edge. I don’t disagree.

Is the Lib Dem investment in coalition government paying off?

Signed up as a Lib Dem supporter and donated. I cast my vote at age 18 for Ted Heath and every general since I have been a Conservative, often canvassing. I am done

Thus an email I saw this morning. Also this morning Justine Greening, long-time Conservative MP for my neighbouring constituency of Putney, resigned the Conservative whip. I have been predicting for a long time that Britain’s political system is breaking up. It has happened much more slowly than I had expected. But it is happening.

The change is being brought about by two groups of iconoclasts, fed up with the established ways of British politics. Right now it is those that have taken over the Conservative Party that are making the running. They are led by Boris Johnson, Britain’s un-mandated prime minister, but many spy an evil genius behind him: Dominic Cummings. Mr Cummings came to public attention as special adviser to Education Secretary Michael Gove in the coalition government of 2010. He fast developed a reputation as a nasty piece of work, despising most other members of the human race. The signature policy of these years was turning English state schools into independently-run academies. The initial idea for these schools being run by local parents and community groups in a bubbling up of local initiative was swiftly crushed, to be replaced by politically well-connected academy chains, whose most distinctive policy was high levels of executive pay. The policy ended up by achieving little more than the looting of public funds. Mr Cummings then moved on to run the official Leave campaign in the EU referendum, where his particular genius shone through. While it is commonplace to blame the referendum result on a lacklustre Remain campaign, it is not so easy to see exactly what it could have done against the trap that Mr Cummings set for it.

We now have a complete change of culture in the Conservatives. There are some parallels with the previous regime of Theresa May before she was laid low by the 2017 General election, with Nicholas Timothy taking the evil genius role of Mr Cummings. But Mrs May’s regime was introverted and comfortable in the civil-service dominated world of Whitehall, even though it despised parliamentary accountability. It was not radical at heart. The new government is much more a movement of a like-minded elite, and it wants to turn the complacent British government upside down. And it is approaching the political challenges like a wargame where the taking of risks is celebrated. They are happy to play fast and loose with Britain’s constitutional conventions; but more importantly they want to turn their party into something more single-minded and ideological, from the pragmatic broad church it used to be. Liberals are not welcome. Mass sacking of Conservative MPs are in prospect.

The other group of iconoclasts have taken over the Labour Party, with the accession to the leadership of Jeremy Corbyn in 2016. There are striking similarities with the new Tory regime. One of the more bizarre features of the current debate is the way this Labour group have suddenly decided that constitutional propriety and parliamentary sovereignty are sacred principles. They are seeking to hijack the outrage at the government’s latest manoeuvres with the slogan “stop the coup”. We should not take this change of heart any more seriously than the silly slogan.

Both groups’ main asset is each other. The Conservatives hope to bring back reluctant liberals and pragmatists with a fear of letting in Jeremy Corbyn. Some polls suggest that their fear of Mr Corbyn trumps even their loathing of Brexit. Labour activists hope for a repeat of the 2017 election, where they succeeded in polarising the debate as being a choice between themselves and the Tories, marginalising the Liberal Democrats, Ukip, and the Greens. They hope to harvest anger at “austerity” and how society is unfairly “rigged”, and combine it with a vague pro-Remain stance which is enough to haul in Remainers on the basis of its contrast with Tory extremism.

Such calculations dominate the threats of a general election on 14th October, before the Brexit Day of 31 October. This election will require the consent of both main parties. But polling suggests that both would start the campaign in a weak position. The Conservatives are polling in the low to mid 30s; Labour in the low to mid 20s. Who is taking the remaining 40% of the vote, and can they be squeezed?

In Scotland, the position of both parties looks hopeless. Mr Johnson’s accession has left Scotland’s Tories in total disarray, and its leader has resigned. The gains the party made there in 2017 look likely to be reversed. Labour too have failed to gain traction. The main beneficiary is the SNP, who look likely to regain their dominance. There may be consolation prizes for the Lib Dems too, who have chosen a Scottish MP, Jo Swinson, as their leader.

In England and Wales the running is mainly being made by Nigel Farage’s The Brexit Party, and by the Lib Dems, with the Greens showing strongly too. Conservatives and Labour have more reason to hope here. The Greens are challenging very few parliamentary seats, and their ground-level campaigning is weak. They usually get squeezed in general elections, and this looks likely again, with the Labour message designed to appeal to their voters. Mr Johnson is hoping that his line on Brexit will have shot TBP’s fox. That party is campaigning all-out for No-Deal, which is popular in quite large sections of the country. It is well-organised, but probably weak at constituency level. Labour’s mild Remain stance, backing a further referendum, may offer it an opportunity to block Labour’s recovery, but Tory Brexiteers are surely likely to rally back to the flag.

Which leaves the Lib Dems. This party’s activists (of whom I am one) like to see themselves as radicals who want to shake up the system. But now they find themselves cast as the party of pragmatism, tolerance, common sense and respect for constitutional convention, though that comes alongside a strong pro-Remain position. The party has a much stronger grassroots campaigning campaigning capability than the Greens or TBP. It comes close to matching that of the ageing Conservatives (though these may be energised by Mr Johnson), but is still way behind Labour’s. The Conservatives, on the other hand, look much better funded.

Can the Lib Dems capture the zeitgeist and hold their own alongside the two “main” parties? It is an opportunity, but not more than that. The years of coalition with the Conservatives from 2010 to 2015 nearly killed the party, but it now starts to look like an asset. Its leader has more government experience than Labour’s (and has been a minister for longer than even Mr Johnson, though not at cabinet level), and it shows the party to be pragmatic and politically moderate, even if that’s a description that many activists would shun. Perhaps now they will get the last laugh on the erstwhile coalition colleagues. And if their poll share (now a bit below 20%) holds up, it will be harder for Labour to get traction too.

In fact Labour are unlikely to go for a pre-Brexit election, though Mr Corbyn seems to want one. It complicates their message too much. But who knows where on earth the steady corrosion of British party politcs will take us?

A very British coup

I have returned from a ten day holiday, mainly in Austria and Hungary to find my country with a very different government in charge. There has been no election. The new government has even not been tested by our democratic representatives in parliament, and will not be for at least another month. Such is the British constitution, an odd mixture of the democratic and monarchic.

I struggle to accept that Boris Johnson is now our prime minister. This man has always been something of an outsider to the British political establishment, and somehow not a serious politician. His main claim to fame was an eight year period as Mayor of London, an office that sounds more impressive than it actually is. Apart from that he spent a year as Foreign Secretary, where he has had at best mixed reviews. He comes into his current job after a further year of making mischief from outside government. But he convinced most of his fellow Conservative MPs that he was the man for the moment, and this was emphatically endorsed by the party’s membership, who barely amount about 160,000. This does not even work by the principle that a majority of a majority is a majority – as Conservatives MPs are not a majority in parliament, and still less so in the country as a whole.

Mr Johnson then swiftly completed his coup by replacing government ministers wholesale. There was no attempt here to achieve balance across the parliamentary party. Instead there seemed to be two tests: personal loyalty to Mr Johnson during the leadership contest, and a readiness to accept a no-deal Brexit. More shocking than this is the guiding philosophy of the new government, set not just by ministerial appointments, but those of senior advisers. It has a revolutionary air: one that is eager to crush all opposition to achieve what it has decided is the will of the people. This is quite unlike any government I can remember. There are flashes of Tony Blair and Margaret Thatcher, but even these felt they had to make some attempt to get support from across their parties, even though it was clear that they preferred not to.

For now this gives the new government a freshness and energy, as is often the way when the tiresome ways of negotiation and compromise are suspended. The focus is on achieving Brexit by 31 October without the Irish backstop which was agreed by its predecessor with the European Union.

The political objective of this is in plain sight. Nigel Farage’s The Brexit Party poses a mortal threat to the Conservatives, as was demonstrated by the European Parliament elections. Behind this lies the frustration of much of the country with the failure to implement Brexit. So far Mr Johnson’s strategy is working. TBP is sagging in the polls. And although the Conservatives lost the Brecon and Radnorshire by election largely because of TBP, the trend is clear.

But this all looks more like a campaign that a credible government programme. Mr Johnson has laid out an uncompromising negotiating position for the EU; his ministers are making daily promises to spend money on this or that problem; there are also promises of tax cuts. There is no attempt to reconcile all this with reality. But the new government has to deal with two very big problems, even before it needs to work out how it is to run the government finances.

First is that it has a technical majority of only one after the Brecon by election, while having many disaffected MPs in their own ranks, who have little to lose by creating trouble. It is hard to see that a majority can be found to support a no-deal Brexit, unless a large number Labour MPs from Brexit supporting areas start to panic.

The second major problem is the reality of negotiating lasting international treaties. The government’s supporters claim that such negotiations are similar to those for buying or selling property, or for supermarkets buying produce from food suppliers. The US president has the same sort of idea. But their objective is not a one-off transaction, but a long-term relationship. This requires trust, which is hard if you keep threatening to tear up any deal that you unilaterally decide you don’t like. It is also hard to compromise when part of your act is to whip up your own political base with uncompromising rhetoric. Donald Trump is finding it impossible to complete pretty much any international negotiation so far, with the exception of relations with Mexico and Canada, where the power imbalance is massively in his favour. The government hopes that the threat of no-deal chaos, especially in Ireland, produces just such a power imbalance in Britain’s favour. But the politics look terrible and time is short. Also many Europeans think that no-deal represents a colossal act of self-harm by Britain, and might be tempted by the response of “Go ahead: make my day”. Some think that a chaotic British exit will be a lesson to other countries tempted to threaten their own exit.

So what on earth is the government’s strategy? There is a twin answer to the first problem. First is that by ducking and weaving the government may be able to achieve a no-deal without having to get the approval of parliament. This is tricky, but they have made it clear that they have no scruples about whether such an approach is democratically legitimate (since they are simply enforcing the will of the people, of course), and their best brains are on the case. The second answer is to fight and win a general election. That looks a tall order, but British politics is volatile and they may get their chance.

And the second problem? They appear not to care, or they may even believe their own propaganda, which is either that the EU (and the Irish government in particular) will give way and create some sort of transitional period towards a hard Brexit, or that a no-deal Brexit will only cause problems in the short-term. It would doubtless be chaotic, but politically the key is not to catch the blame, they seem to think. This looks much to sanguine to me, but I don’t live in their world.

Will they get away with it? Mr Johnson has one thing going for him: the abysmal state of the Labour Party. They may be too weak to stop him, but too strong to stop anybody else from doing so. That party’s predicament deserves a blog post of its own. Their leadership looks incapable of exploiting the chaotic situation to its advantage. If the Tories can crush TBP (perhaps neutralising them with an electoral pact, though that looks very hard to pull off), and then reassure Brexit-supporting Labour supporters with its apparent abandonment of austerity, then it is all to play for.

The Conservative and Labour parties are in trouble

After the general election of 2010, and the Liberal Democrats entering a coalition with the Conservatives, I remember the cognitive dissonance that overwhelmed the party. It was the centre of sustained media attention, for the first time in its history, and with all the trappings of being a significant political force, with MPs and cabinet ministers. But its support amongst the public had died. Many insiders talked themselves into thinking that voters would return in time for the next election, using swathes of statistical evidence from past elections. But the party was as good as finished and was nearly wiped out in the 2015 election. Something of the same dissonance is now being experienced by the Conservative and Labour parties. Opinion polls put each of them at only about 20% of the vote, alongside the new Brexit Party (TBP) and the Liberal Democrats returning from the dead. The duopoly which is so much party of both parties’ raison d’être is facing its most serious challenge ever.

This collapse in support of the two parties that have anchored Britain’s political system for getting on for 100 years follows a global trend, especially here in Europe. It has happened in France and Italy, and is in the process of happening in Germany and Spain, not to mention several other countries. But it is a shock to the British political establishment. The duopoly had its best election in 40 years in 2017, when they Ukip followed the Lib Dems into collapse and they collectively took more than 80% of the vote. They even managed a significant recovery in Scotland, where both had been crushed by the SNP. You could almost hear the sigh of relief, not just from those parties’ luminaries, but amongst the tribe of civil servants, think tankers and journalists who yearned for the old familiar ways of the two-party system. Britain seemed more like the United States or Australia than its “Continental” neighbours.

But in America the political parties are democratic, with processes of open primaries to select candidates, allowing new ideas and people to take hold in alignment with wider popular attitudes. Instead of being replaced, the Republicans and Democrats are being transformed away from the traditional conservative and labour based models to being modern reactionary-nationalist and liberal-green parties – like the parties that are doing well in Europe. The Labour Party flirted with a more democratic and open party structure in 2015, which resulted in the election of Jeremy Corbyn as leader. But it has quickly reverted to the closed, cadre-based organisation as the hard left sought to consolidate its hold on the party machinery. The Tories abandoned their brief flirtation with open primaries long before. Party activists, and to a lesser extent paid-up memberships guard their privileges assiduously. That is the European way. The Lib Dems similarly rejected the injection of democracy earlier this year, amid much scoffing by activists.

The immediate problem for both parties is easy enough to see: Brexit. This issue divides parties formed on traditional lines, but unites nationalist and liberal forces on opposite sides, with greens joining the latter. Whether the issue of the UK’s membership of the EU really should divide liberals, greens and nationalists like this is an interesting question. There are some good liberal and green arguments for being outside the EU. But both loathe the reactionary nationalists with their illiberal and anti-environmentalist beliefs, and this doubtless suppresses any reservations; the conversion of the Greens to EU membership is much more recent than many realise.

For the Tories the problem has been that they have quite reasonably sought a version of Brexit that achieves its main objectives with the minimum of disruption. But this has ignited the anger of the rising tide of nationalists in their ranks, who see this as a sell-out, and have thwarted its attempts to get legislation through. TBP then arose from the ashes of Ukip as a much more disciplined and coherent organisation, having learnt much from Donald Trump’s techniques, and a major threat from the nationalist right. This has tapped the zeitgeist of the party’s bedrock support better than its own party leaders. The European elections showed that TBP posed an existential threat to the Tories, and so both candidates for the party’s leadership are trying to take their party into TBP’s ground, especially with support for a no-deal Brexit. That angers their liberal supporters who are deserting the party for the Lib Dems. By dealing with one threat they are opening up another. This is likely to get worse if the party either delivers a no-deal Brexit, or, indeed, if it fails to deliver Brexit at all.

Conservatives clearly hope to win their liberal supporters back by frightening them with the prospect of Labour coming to power. The problem with that is that Labour support also is in free fall and the party no long poses such a credible threat. A key ingredient of the success of the duopoly is stoking up fear of the other party. But as Times columnist David Aaronovich recently wrote of prospective Tory leader Boris Johnson:

If anything “vote Boris to stop Corbyn” has less resonance than, say, “vote Lib Dem to stop both of them”.
David Aaronovich, The Times 3 July 2019

Labour have reached their sorry state because the leadership is understandably worried by the popularity of Brexit amongst their traditional white working class supporters, especially in many northern towns. They do not see Brexit as the defining issue of the times, but rather they say it is “austerity”, or the struggle of the less well-off against a system rigged against them. They hope to paint a messy Brexit as Tory incompetence and rally a backlash drawing in both supporters and opponents of Brexit. For a long time this looked like a clever strategy, but now it looks like a fatal weakness. As Britain approaches an autumn of political crisis, the party is without a coherent political message on the most important issue of the day. If the party had followed through on its democratic revolution of 2015, it would be leading the struggle to fight Brexit, and suffocating the Lib Dems and Greens in a journey towards being a modern liberal-green movement. To follow through on their strategy they needed the government to get its Brexit deal through parliament so that they could try to change the subject – but when it came to it they were too scared of a backlash from their anti-Brexit supporters.

Doubtless activists in both parties, like Lib Dems during the coalition, think that the ship will right itself by the time the next election comes. Labour supporters remember the surge in their party’s support in 2017. Tories think that Boris Johnson will puncture Nigel Farage’s TBP and generate a surge of support with his charismatic personality. A poll back in June suggested that just this might happen, albeit with a low poll share for the party.

But it is hard to see how events can unfold that will make these wishes come true. If the next election happens before this Autumn’s scheduled Brexit date, the Tories will be undermined by their support for a no-deal Brexit, and Labour will be undermined by their ambiguity on reversing Brexit. If the election happens afterwards, either after a no-deal or a failed Brexit, both parties risk being swept aside in the public backlash. And if a Brexit deal of some sort manages to be concluded, the process is likely to fatally fracture both parties – as a large number of Labour MPs will be required to get it over the line. The situation is becoming so unstable, however, that it is not impossible for one of the parties to still triumph – but this would require a quality of leadership that neither Boris Johnson (certain to be the Tory leader) nor Jeremy Corbyn possess. Strange times indeed.

A divided nation is bad news for the Tories

The two televised debates between the contenders for the Conservative leadership served at least one useful purpose to those of us who have no role in the process. They showed how divided the country is and how different sections of the public live in different and irreconcilable worlds.

Brexit is the problem.The contenders hunted for a reasonable centre-ground on other issues. They deplored the failings of public services after years of cutbacks; they thought tackling climate change should be a top priority; they celebrated multiculturalism. None of these are a given amongst pro-Brexit hardliners. The Brexit Party’s Nigel Farage happily focuses on tax rather than services, says climate change is a hoax and deplores multiculturalism, drawing inspiration from Donald Trump. There is polling evidence that such a combination of views is commonplace amongst Conservative Brexiteers.

But this moderation amongst the leadership contenders counts for very little. They are overwhelmed by Brexit and the candidates take one thing as a given: Brexit must be achieved by 31 October (or perhaps a shade later) at virtually any cost. Arguments about whether or not this is a good idea are redundant, because, they agree, public confidence in politics and democracy would collapse otherwise. Implementing the letter of a three-year old referendum decision is a decisive test for democracy in this view, otherwise the liberal elite will have succeeded in thwarting the will of the people. The only argument is over attitudes to a no-deal Brexit, and even there only Rory Stewart (now eliminated) suggested this should be ruled out, as much because parliament is against it as that it is a bad idea in itself. All other candidates agreed that a no-deal Brexit was a bad thing, but said that the prospect of delaying Brexit was even worse. They tried to reconcile this awkward stance by saying that it was crucial for the country’s negotiating position to present a credible threat of no-deal, as if negotiating a complex and long-term political relationship was like Tesco trying beat down its suppliers on the price of cheese.

To people like me, who may now be in the majority of the country as a whole, this is utter lunacy. We should do Brexit because it is good for the country not solely because of a three-year old referendum. And just what is so undemocratic about going back to the country in a further referendum if parliament cannot agree on a deal? And yet that last option is so beyond the pale amongst the leadership candidates that it wasn’t even discussed. And as for keeping no-deal “on the table”, it looks like an effort in pointless self-harm that will weaken the county’s negotiating position in the long-term yet further.

And yet the leadership candidates are not stuck in a Westminster bubble. It is the reverse: they know full-well that this is how the party’s core supporters feel – and that is why they deserted en masse to The Brexit Party (TBP). If the new Conservative leader does not take this tough line on Brexit, the party could very well melt down. The leadership contest must be fought in the world-view of the hard Brexiteers, with the rest of us acting as helpless spectators.

But that is climbing out of the fire and into the frying pan. The main reason that the Conservatives did so badly in the European elections was defections to TBP. But there was another reason: many others defected to the Liberal Democrats. I know quite a few of them. These people do not inhabit the world of the hard-Brexiteer. To win the next general election, the Conservatives will somehow need to get these people back. The contenders left some clue as how they hoped achieve this. The first was they want to avoid a general election for as long as possible. They all agreed on that, notwithstanding the government’s lack of a majority, and their protestations about democracy. Second they hope that by achieving Brexit they can move on, and change the subject to stopping Jeremy Corbyn.

That could work, but it depends on passing something that looks very like Theresa May’s deal, allowing departure on 31 October, or even before. This will soften the Brexit transition, and, crucially, make the argument over a further referendum redundant. Brexit will still be an issue, as the future trading relationship has to be negotiated, but on a level that makes it much easier to push down the political agenda, though there is a danger that the end of the transition period gets tangled up with the next general election.

But it is much harder to see this working with a no-deal. Such an event would rank alongside Black Monday in 1992, when Britain dropped out of the European Exchange Rate Mechanism, destroying John Major’s newly reelected government’s credibility – a position from the Conservatives were unable to recover for nearly two decades. Furthermore it would create a series of future crises that would mean that the government would be unable to control the agenda. The sunny post-Brexit uplands, that leadership contender Michael Gove hopes for, will be very hard to usher in in time.

Can a new Prime Minister succeed where Mrs May failed three times? There is hope. Labour MPs, especially those in heavily Leave-voting areas, are getting twitchy and discipline may be starting to break down, to judge by Labour’s failed attempt to move against a no-deal last week. The EU may be able to offer a token something to cover the retreat. Some of the contenders correctly understand that the key will be the Irish Republic’s government, as a no-deal would create huge problems there. English Tory understanding of Irish politics is woeful, but something may be achieved.

Meanwhile the non-Brexit supporting half of the country will have to endure some further weeks of public debate amongst Conservatives conducted in a world that looks completely unreal to them. In due course there will surely be an anti-Brexit backlash, for which Conservatives will be utterly unready.

The astonishing rebirth of Boris Johnson

The rebirth of Boris Johnson’s political career is astonishing. He has secured the backing of enough Conservative MPs to ensure that his name will be one of the two that go forward to party members to choose as party leader. And the party leader will, according to now well-established precedent, become the next prime minister. He is expected to win. I am only beginning to digest this.

Mr Johnson’s main personal political achievement to date (as opposed to his role in the 2016 referendum, which may have been decisive) has been securing two terms as London’s Mayor. This was hardly the triumph that his boosters claim. His principal opponent (Labour’s former Mayor Ken Livingstone, well past his sell-by date) was weak, and scrutiny from the media and elsewhere proved easy enough to evade. He had little or nothing to do with the achievements touted on his behalf (such as the 2012 Olympics, the public bike scheme, and an improvement in London’s state schools), and there were a series of ill-conceived vanity schemes (new double-decker buses, the “Garden Bridge”, water-cannon for the police). His one role in senior politics was a disastrous stint as Foreign Secretary. The spectacular implosion of his previous bid to become Conservative leader in 2016 would have finished most political careers. Most of his fellow MPs don’t like him. He is, however, one of the few modern British politicians with personal charisma, and he is as different in personality from the current leader, Theresa May, as it is possible to conceive. Given Mrs May’s failure, the demand for the next leader to be different is understandable. Mr Johnson, who has managed to accrue a significant personal income, has bought in professional advice, and it is working wonders. There are parallels here with that other reborn political power, Nigel Farage. Political advisers (or “strategists” as these tacticians like to be called) had a bad name after the failure of Mrs May’s 2017 general election campaign, but they’re back with a vengeance. In addition to good quality tactical advice, he has also had the benefit of an excellent parliamentary whipping operation – one observer detects the influence of former Chief Whip Gavin Williamson, who proved a gaffe-prone Defence Secretary and was sacked by Mrs May, but who was very effective in his former role.

Is his rise to Prime Minister inevitable? There are two obstacles. The first is the members’ ballot. Such polling evidence as there is suggests that he has a commanding lead. But as it starts his opponent is likely to have some momentum. Two of the potential candidates might give him trouble. Jeremy Hunt, his successor as Foreign Secretary, oozes a smooth competence, and could harvest a move for a safety vote if the wheels start to fall off the Johnson campaign. That is not impossible; many have noticed that his advisers are trying to keep him out of public scrutiny. This is how things went so badly wrong for Mrs May in 2017: he will have allow for a bit of rough-and-tumble.

The other candidate that could be trouble is rank outsider Rory Stewart. He is the only other candidate with a personal charisma that matches Mr Johnson’s, and he has fought a quirky but effective campaign. He is not a safety candidate, like Mr Hunt, but he might be able build the same sort of unlikely momentum that Jeremy Corbyn did when he was elected as Labour leader.

But Mr Stewart is unlikely to be given that chance by MPs. And Mr Johnson probably has the skills to keep Mr Hunt at bay. Which leaves the second obstacle to the premiership: parliament. Labour, quite rightly, plan to launch an immediate vote of no confidence when the new Conservative leader takes up the PM’s role. The government’s majority (with the DUP) is thin; a handful of Tory MPs could fail to back him, and that would be that. This would be messy, but a general election is the most likely result, which Mr Johnson might lose.

But the odds are that Mr Johnson will survive any challenges posed by party members or parliament. What then? Most predict a chaotic and short-lived premiership, but we really don’t know. His leadership campaign shows a certain steel and political competence. The parallel his backers would like to offer, no doubt, is Donald Trump. He is at least as lazy and vague on detail as Mr Johnson, but he is lasting the course and might well be re-elected.

That parallel is rather an alarming one, as Mr Johnson is clearly taking Mr Trump as a role model (as is Nigel Farage). Mr Trump has achieved much of his success by a process of steadily undermining his country’s governing institutions and conventions. And Britain’s institutions are long on convention and weak on legal enforceability. One example is now much talked about: the idea that parliament might be suspended to prevent it from blocking a no-deal Brexit. Mr Johnson has not ruled this out.

But there is an important difference between Trump and Johnson. Mr Trump was reasonably clear about what he wanted to do, and by and large he has followed the agenda set out before he was elected, love it or loathe it. Mr Johnson has said as little as possible about what he wants to do and how, allowing his supporters to project their wishes into the blank space. He wants to achieve Brexit by 31st October, but to some audiences he suggests this will be negotiated with the EU, to for others he suggests complete breakdown.

But as PM he will have to take the hard decisions that nobody else wants to take, and Brexit, whichever way it goes, will provide a steady stream of such decisions. And then there is government finances: he can’t keep everybody happy without creating a bust-up about finances. He is bound to lose people, which matters given his shaky parliamentary position.

My guess is that he will be tempted to risk an early general election, hoping that his charisma will thwart Mr Farage and crush a by now rather tired Mr Corbyn. British politics is volatile and it might well work.

It is just as likely to bring the house tumbling down on him and his party. British politics is about to get much more exciting.

The two party system takes a blow – but what about a general election?

It is a good moment to be a Liberal Democrat, after the party’s strong showing in last week’s local elections. The party were unequivocal winners, while both the the big parties fell back. After years of being ignored and told that the party was broken forever, it is good to be back.

But it is better than that. What the results show is that the party is rebuilding its grassroots strength, and with it a base in local government. This has been the party’s secret weapon, little understood by the Westminster chatterers – local government was how the party built its strength in the 1990s, before it became a significant parliamentary force in 1997. This is the result of hard work by activists working at local level across the country. It wasn’t just the Lib Dems. What surprised the political commentators even more than the success of the Lib Dems, which was as the upper end of expectations, was the relative success of the Greens and local independents. This too required grassroots activism.

Meanwhile the Conservatives, who had the most to lose this time, did very badly, losing over 1,300 seats, at the top end of expectations. The seats were last fought on a relative high for the party in 2015, so some loss was expected. They did worst in areas with a high Remain vote in 2016. What really surprised commentators was how Labour failed to capitalise on this. The party gained seats in some places, but lost in others, with a small net loss of seats overall. Nobody was expecting a spectacular performance, but if the Tories were doing very badly, they were expected to pick up some of the pieces. Unlike the Conservatives, Labour fared worse in high Leave supporting areas.

The retreat of the main parties comes as a surprise to many politicos. Two party politics had been in decline for since the 1980s, with the rise of first the Lib Dems (and their predecessor parties) and then Ukip. But in the 2017 general election both the Lib Dems and Ukip were crushed. This was a huge relief to both Conservatives and Labour, and to many Westminster journalists too. Two party politics seemed to them the natural way of being, and allowed most politicians to focus on their internal party jockeying, rather than having to talk to voters much. Life became much simpler.

But that collective sigh of relief was a huge mistake, as both major parties turned inwards. The Conservatives tore themselves up over Brexit. To be sure this was an important issue, but they assumed that whenever they went to the country they could rally the voters around an anti-Labour message, and get away with it. First they managed to upset their supporters who voted Remain, only to disappoint the Leavers by failing to agree on how to implement Brexit on the target date of 29 March. The indecision is worse than choosing the wrong strategy: now Remainers who had been persuaded to buckle down in the name of democracy are starting to question that logic, as so many Brexiteers try to move the goalposts towards something much more extreme than they advocated in 2016.

Labour, meanwhile tore itself up over an internal power struggle, as the left saw its chance to take a radical left wing programme to the country by consolidating their power within the party. If the Tories cared too much about Brexit, Labour did not care enough. They assumed that the Tories would make such a mess that they would clean up at the next election. That left them with little to say on the big issue of the day. Labour Brexiteers are annoyed at the party’s role in delaying Brexit; meanwhile the party is unable to pick up disillusioned Remainers from the Conservatives.

That meant a poor performance at these English locals for both big parties, which each picked up a 28% vote share, the lowest combined total for many years. There is likely to be an even worse performance at the forthcoming elections for the European parliament, though they should be able to shrug these off, as they have in the past.

The key question is how much this matters at a general election. The electoral system makes it hard for smaller parties to break through. Both the big parties have some reason to hope that it will be business as usual. That would be complacent.

Firstly neither party looks well placed to roll back the threat from the SNP in Scotland, which will be critical to Labour’s chances in particular, but also important to the Tories. Up to 50 seats may be unavailable. The Lib Dems will doubtless hope that they can get a dozen or more additional seats, with the Conservatives looking the most vulnerable. The Greens look stronger than they were, but can only mount a challenge in a handful of seats.

But the big unknown is how well two brand new parties will perform. The most significant is Nigel Farage’s Brexit Party. This has made an impressive start. It looks well organised and well funded. It is sure to do well at the European Parliament elections, which play to its strengths. It is mainly an air war election, and Mr Farage has no difficulty in getting the attention of mainstream media, much to the annoyance of other smaller parties, who are routinely ignored by the BBC among others. The party has also managed to distribute some centrally organised literature. It will doubtless try to make mischief on social media, a successful medium for populist parties not interested in proposing any constructive policy programme. But, though the party attracts interest and volunteers, it has no grassroots organisation. This is not one of Mr Farage’s strengths, and it is a vital ingredient to success at general elections. Mr Farage himself might be a successful spoiler candidate (he is rumoured to be mulling a challenge to Boris Johnson, widely thought to be the the most likely next Conservative leader), but the party may turn out to be no more than a nuisance.

The second new party is the former Independent Group, Change UK. This party appears weak organisationally, and it is unclear what it actually stands for. It is trying its hand at the Euro elections, but even if it does well there (which I am not expecting), it is hard to see where that will lead. Building a grassroots organisation is very hard work, and it is far from clear whether they are up for it. Cannibalising Lib Dem support, a strategy which many in the party clearly wanted to attempt, now looks a lot harder. There are plenty of places where the Lib Dems are weak, though. Will they try to do something there?

So things don’t look so bad for the big parties when it comes to parliamentary elections. But they do have a problem: Brexit. The country could continue to muddle on trying and failing to leave; it could leave with a deal, which will not be unlike the one the government has already negotiated; there could be a crash out with no deal; or there might be a further referendum which halts Brexit altogether, or else leads to exit with or without a deal. Each of these outcomes will cause major problems for both the Conservatives and Labour. Dramatic upsets can happen (for example the rise of the SNP in Scotland in 2015, or the election of Emmanuel Macron in France). It would be foolish to rule such an earthquake out.

What should the progressive smaller parties do? Some kind of an arrangement to stay out of each others’ way looks sensible for the Lib Dems, the Greens and Change UK, whether or not an electoral pact is feasible or desirable. Meanwhile, each of these three needs to think of ways that it can capture the imagination of a public that is fed up with politics as usual. If these parties could agree on a broad programme of political reform, radical action on the environment, and revitalising left-behind parts of the country, perhaps that would do the trick.

There are alternatives. Theresa May is in deep trouble

Beware the superficial when assessing Theresa May, Britain’s Prime Minister. Most of the time she seems very weak, but somehow she survives as her position is much stronger than it looks. Conversely this is punctuated by moments of triumph, when she seems to sweep all before her. This always precedes a major reverse. Yesterday as she closed the Conservative conference with a confident speech she looked strong, though perhaps short of triumphant. In reality she has never looked more vulnerable.

Of course the central issue is Brexit. I have generally given this an optimistic gloss, being one of the few people to say that it is going reasonably well for Mrs May. But there is now serious reason to question her judgement. Her claim that there is no alternative is now in question.

Mrs May has taken up a very risky negotiating strategy. She is sticking to her proposal, usually referred to as “Chequers”, though it looks as it the government has stopped using that word to refer to it. This is a very complex fudge by which Britain accepts EU Single Market product regulation for goods, but not for labour and environmental standards, nor for the movement of workers, and a customs arrangement whereby Britain can collect both its own and EU tariffs at its borders, allowing the easy movement of goods to the EU. The idea is to have an open border between Northern Ireland and the Irish Republic, and allow the intricate supply chains that have built up between the UK and EU countries to continue. But the problem is that EU leaders are really not happy with this. It looks too much like “have your cake and eat it”, where Britain can undercut EU labour and environmental regulations and compete unfairly. Not to mention getting all the benefits of a customs union while freely negotiating alternative tariffs with non-European partners. Smarting from what they see as the growing nightmare of the pick ‘n mix relationship they have with Switzerland, and worried about signals they might give both to other countries in the union and those just outside, they are anxious to guide the UK down one of the clear institutional models that they have already developed.

That leaves a very dangerous stand-off. If neither side gives way there could be a potentially disastrous “no deal” on 29 March 2019. Some Brexit supporters are quite relaxed about that idea. They assume that a number of side-deals can be done to mitigate the worst impacts, like grounded aircraft, halted medical supplies, non recognition of driving licences and so on. That is much too complacent. Though many of the scare stories spread by Remainers can be dealt with like this, the relationship is much too complex for such deals to go far enough, and it looks a bit like the hated Swiss model anyway. And there is no side deal possible that will prevent huge difficulties for goods crossing borders. The prospect of no-deal is so daunting that it might persuade parliament to go for a further referendum allowing Brexit to be reversed, something that has started to worry Conservatives, to judge how keen they are to rubbish the idea.

The EU is in fact offering two alternative ways forward for Britain after the transition period ends on 31 December 2020 (or perhaps later…). The first is full membership of the Single Market as a member of the European Economic Area (EEA). This has supporters in Britain. It might be bent to accommodate Labour’s “tests” and so allow a parliamentary coalition that excludes most Conservative MPs. But it means that Britain will be a rule-taker from the EU, and continue to allow EU workers in freely. Most of those who voted for Brexit, and even some who didn’t, would surely not support it. The second way forward is to do a free trade deal along the lines of the one done with Canada (referred to as “Canada” or “Canada plus”). This is the real threat to Mrs May, because Tory hardline Brexiteers support it. Much worse, so do many others, as it looks much better than no-deal, as at least there is nearly two years of transition and quite likely more. It is possible that there will be cabinet rebellion – or even a revolt amongst Conservative MPs that turns Mrs May out of the leadership.

Mrs May’s objection to Canada is that it creates a problem with Northern Ireland, as the EU currently insists that there would need to be a boundary of some sort between it and the rest of the UK. The rebels’ calculation is the the EU will give ground on this, not least because a no-deal would have a very hard impact on the Irish Republic. They have even come up with various fudges and fig leaves that might make it viable.

So there is a clear and coherent alternative strategy for Brexit to Mrs May’s. But her position is made weaker by something else. Her remarkable longevity as leader since the fiasco of the 2017 General Election was not just because there was no alternative Brexit strategy, but because there was no alternative leader. Or rather, that the main alternative looked to be Boris Johnson, the former Mayor of London and Foreign Secretary. He was on manoeuvres this week, giving a speech outside the main conference that apparently went down a storm. I have accused Labour’s John McDonnell of advocating candyfloss policies, but Mr Johnson makes him look like a serious civil servant. Now two serious alternatives as leader have now emerged: the Home Secretary Sajid Javid, and the new Foreign Secretary Jeremy Hunt, who is conspicuously more competent in that role than Mr Johnson ever was. Mr Johnson’s position, meanwhile, is weakening. In a leadership election Tory members make the final choice between the last two candidates selected by MPs. Mr Johnson can’t guarantee being in that top two (a bit like the similarly charismatic, but more competent, Michael Portillo when the system was used the first time). And even if he does make it, the members may well lose their nerve and vote for the alternative. Tory MPs may be prepared to risk starting the selection process.

Such a rebellion is still unlikely before March next year, though, since it is too close to Brexit day. Afterwards it could happen very quickly. They will need to get a move on. The next general election is very winnable for the Conservatives. Brexit will stay in the news for years after next March, but the political sting will be much less, especially if Mrs May can be scapegoated for the worst aspects. Remainers may be energised now, but they will run out of steam once the country has formally left. They are not at all clear on what they want after that – they have barely started to think about it. Labour are vulnerable. They have a leader who is regarded as nice, sincere but ineffective by most people, and as an evil villain by many others. They have some interesting policies but a lot of these haven’t been thought through, and they will wilt under sustained attack. The group of advisers that surround their leader, Jeremy Corbyn, remind me of the tight coterie that surrounded Mrs May before her disastrous election of June 2017: clever but inward looking.

But the Conservatives have weaknesses of their own. Their membership is low and ageing. The Brexit brand, which they have taken ownership of, is toxic to many. A new, younger leader will help with this. But they also need time to prepare for their campaign. The party owed its unexpected victory in 2015 to years of careful preparation; they did so badly in 2017 because they went into it with no preparation at all. So Tory MPs need to get Mrs May out of the way as soon as they can. And then there is all to play for.

As alternatives start to look more viable, Mrs May’s days are surely numbered.

2018: Trouble is brewing between Germany and Italy and between China and the US

Prediction is a mug’s game; you are more likely to miss something important than demonstrate insight. And yet it is the only good way to put your insights to the test. Science may be mostly about gathering and reviewing evidence, but the true test of its worth is prediction. And so, in line with tradition for this time of year, I feel I must have a go.

When I started to think about it, my feelings about 2018 were anticlimactic. The British political deadlock will continue: there will be no election and no change of PM. The Brexit negotiations will somehow manage to put off the more difficult problems yet again, probably through a transition deal that will look very like staying in the Single Market. The investigation into the Trump’s campaign’s connections to Russia may snare members of his team but not the man himself; he will stay in office. The Democrats may take the House of Representatives, but they won’t manage to retake the Senate. And so on. Things will limp on much as they are now.

But none of that is very brave. It just guessable, keep-your-head-down fare that does not put my understanding of the world under any real stress. And yet proposing something more exciting is a matter of luck, especially if I am confining my predictions to a twelve month period. I need to look at things another way. Where do I see trouble brewing, even if the chances of something breaking in 2018 is less than 50%?

Let’s start with the world financial system. There is something unstable about it, even if it does not look as dangerous as it did in 2007 – it is more like the tech bubble of 2001. Asset prices look too high, largely because there is more saving than than the system is able or willing to convert into productive investment. This applies to the West, where too many assets are piling up in the hands of businesses and rich individuals, while many forms of investment are commercially unattractive to most people. And it applies to China, where there is something not right about the volume of money invested, especially through state owned businesses; a lot of useless assets don’t seem to have been written off. But what will be the proximate cause of a financial crisis? A Chinese banking breakdown? Inflation breaking out in the US? A panic in the property markets? And when will the crisis strike? Personally I feel that government bonds are a better bet than other asset classes in the medium term, though that would not be the case if inflation got going. But that is more of a threat in America than it is in Europe or Japan.

And there is something not right with the capitalist system. Technology has changed the way it works, and our political systems have not caught up – rather like the mid 19th Century world in which Marx wrote Das Kapital. Most conventional economists really haven’t grasped this or it implications. The answer will be political change, but what? Without answers, political pressures will build up, and not just in the developed world. It is fashionable to suggest that liberal democracy is in danger, but the situation in the autocracies of China, Russia and Turkey, to name but three, don’t actually look any less tractable. But where will the political system crack? Governments have become better at repression. And there is no convincing alternative to sell. Yet.

What of Britain? The Conservatives look to be in deep disarray, but they have a lot of strengths – especially the widespread fear of the alternative, and the substantial funding that could unlock. We need to remember how close Theresa May came to a triumph, with the coherent ideology of Nick Timothy behind her – she might have destroyed Labour’s working class base. Their introversion did for them in the end. Can a new leadership revive their fortunes? I see similar strengths and weaknesses in Labour. Are they peddling new or old wine in their old bottles? I suspect more new than their critics give them credit for, which will make them a much stronger proposition. But there is an introversion too. The leadership is not sharing its thinking about what to do with this country; it just wants disparate people to project their hopes onto their vague pronouncements, so that they can gain power; only then might they share their real thinking with us. Meanwhile, the tensions within British society – the stagnation of the left-behind places, the squeezed funding for public services and benefits – will serve to increase frustration. Something spectacular could break the deadlock. But what and when?

And Europe? This looks like another deadlock. The populist xenophobes may have stalled a bit in 2017, but they are alive and well. It is striking that Poland’s ruling party remains very much in control, in spite of the fact that many Poles do not share their paranoia – their economic policies, which involve widespread cash handouts, are popular, and may not be as disastrous for the economy as many critics suggest. Economics is at the heart of politics – and politics is at the heart of economics. But the biggest threat to European stability comes from Italy, where elections are to be held in 2018. We might well get a strong pushback from that country against the way the Eurozone is run, at a time when German politics is being pushed in the direction of more conservatism on the Euro, and not putting Germany’s savings surplus to constructive work across the zone. That conflict could cause the system to break. But maybe the French can intermediate to give the Italians what they want while making the Germans feel they have won?

In America I see a strange mix of euphoria and anger. The tax reforms passed before Christmas were a big win for the Republicans, and it will give them real momentum. While the Administration, and the tax reforms, are generally unpopular, relentless propaganda from the many rich winners may baffle floating voters for a bit. That could be good for the Republicans in the congressional elections. It is a tall order for the Democrats to take either house, especially the Senate, where Republicans have plenty of opportunity to win back seats lost at Barack Obama’s high point. But the Administration’s malign neglect of the healthcare system could bite back.

Perhaps more significant for the world as a whole is the thought that China and the USA are on a collision course. Donald Trump is itching to start a trade war with China, to reverse what he sees as America being ripped off. China’s ambitions are increasingly global. At the moment the two have come to an uneasy accommodation, with North Korea a joint focus of attention. But this looks unsustainable; China will not stop North Korea from developing nuclear weapons, as only a military intervention of some kind will achieve that, and China surely does not have the appetite for that. But a trade war between China and the USA would be an attack on one of the central economic and political pillars of the early 21st Century world. It would be extremely destabilising economically and politically. China still needs exports to the US to sustain its economy; the US still requires to be bankrolled by Chinese money. This is surely the most likely source of a financial crisis.

And then there is the risk of war. North Korea is determined to develop a genuine nuclear threat to America, and this is a huge provocation. It’s not a happy situation when we seem to be relying on military men to provide the restraint on the President.

So to summarise: the two critical developments to watch are a clash between Germany and Italy over the economic management of the Eurozone, and a clash between the US and China over trade. Either or both could precipitate a global financial crisis resulting in a substantial reduction in asset values and the banking woes that would follow from that. I am cautiously optimistic that the problems of the first of these will be contained; I am not at all optimistic on the second.

The Budget shows that the Tories are in a political cul-de-sac

I will break my self-imposed silence because yesterday’s British Budget is one of those great set-piece occasions which can be used as a moment of reflection. Predictably, most in the news media squander this in a silly game of speculation about the short-term prospects of political leaders. But the Budget poses more profound questions.

The government faces two profound economic problems, which it must either learn to live with or expend political capital to solve. These are low productivity and housing. There are other big problems, of course: Brexit, austerity, regional disparities and income inequalities, for example. But Brexit is more about means than ends; austerity is symptom of the productivity problem; and the other problems are not so high on political agenda right now, though they are important to both housing and productivity. Broadly speaking, the government is being forced to embrace the productivity problem, and is doing its best to confront aspects of the housing problem, without being able to do enough.

Let’s look at productivity first. This is about production and income per hour worked. Since unemployment is now low, and immigration is looking less attractive, increasing productivity is the key to raising incomes, and, above that in my view, to raising taxes. Weak tax revenues lie behind austerity – the cutting of public spending to levels which are now unsustainably low. The government is forced each year to spend extra money to fix some crisis or other brought about by austerity. This time it was Universal Credit and the NHS. Next year it will be police and prisons, after that it will be schools and student loans. And so it goes on – this is no way to build for the future. The government could try to raise taxes, but this is so politically unpopular that not even the Labour Party is talking about it – they persist in thinking that there is easy money to be raised from big business, rich people and confronting tax evasion. So growth it must be, and productivity must rise. But productivity is stuck in a rut. The big news for this Budget is that at long last the Office for Budget Responsibility has given up hoping that there will be a bounce back, and so reduced its forecasts of income growth, which are used to set tax and borrowing assumptions. The Chancellor, Philip Hammond, talked about fixing this, as all politicians do, but in practice has done very little about it. Labour, for all their huffing and puffing, are no better. Both parties propose a number of sensible small things, like increasing public investment and education, but nothing that gets to the heart of the issue.

So the political class have chosen to embrace slow productivity, by their actions if not their words. They are right, though they need to think through the consequences. My take on the productivity puzzle is different from pretty much everybody else I have read. I think that the primary cause is what economists call the Baumol Effect. The problem is not the failure of British businesses to embrace improvements, but the limited demand for goods and services that are susceptible to advances in productivity, such as manufacturing. There are things that can be done to raise such demand, but these mainly have to do with increasing incomes for those on low incomes – people with high incomes consume less as a proportion of income, and spend more on low-productivity items that confer status. Also if demand for exports could be raised, and imports diminished, that would help – international trade is mainly about high productivity goods. But nobody really has much idea how to deal with these problems beyond tinkering at the edges with minimum wage adjustments and such.

So what of housing? What, exactly, is this about? It is about high costs to both buy housing and to rent it. This is a very complex problem with deep roots. Most analysis is superficial, but this article in the FT by Jonathan Eley is a good one. Among a number of interesting points he makes is that the low number of new housing units being built in recent decades compared to earlier ones is a bit misleading. In those earlier decades a lot of housing was being destroyed: slums and temporary housing for victims of bombing in the war. It is not necessarily true to suggest that the problem is that too few houses are being built. In fact there are deep structural problems with the housing market. One is that private borrowing has been made too easy; another is that changes to housing benefit has subsidised demand for private rental accommodation. The result of this and a number of other things has forced up the price of land relative to the housing built on it, and made trading in land central to economics of private sector developers.

The upshot of this is that it is hard to see any solution to the housing problem without a substantial intervention by the state to directly commission house building, and social housing in particular. Another issue is building on greenbelt land outside cities, which is now forcing suburbs to turn business premises into housing, and turning suburbs into an unhealthy housing monoculture. Caution on greenbelt building is warranted, of course, as suburban sprawl, as demonstrated in so many countries in the world, is not desirable either. Mr Hammond did practically nothing on either of these critical issues. He did try to tackle the housing problem, but mainly through the private sector and private markets which are structurally incapable of making things better for the growing proportion of the population weighed down by excessive housing costs.

That is entirely unsurprising. Solving the crisis, especially in an environment of low economic growth, means that current levels of house prices and rents have to fall. That is a direct attack on the sense of wellbeing of the Conservatives’ core constituency: older and better off voters. And if that isn’t enough, property developers and others with a vested interest in the current system are showering the Conservatives with money. A politically weak government is no shape to take this on.

And that, I think, is the most important political fact in modern Britain. Housing costs are not an intractable problem that we must learn to live with, like productivity. One day it will solve itself in an immense period of pain as land prices, and much of the financial system, collapses. The sooner it is tackled the less the pain will be. Labour may be useless on productivity, but they are much stronger on housing. They have a much better prospect of doing something useful. That does not mean they will win the next election – the forces of darkness on the right should not be underestimated. But it does mean that Labour is looking to be the lesser of two evils.

For my party, the Lib Dems, this is important. It means its stance of equidistance between Labour and the Tories needs to be modified. The turning point, in hindsight, should have been that moment in coalition with the Tories when the then Chancellor George Osborne said that he could not support the building of more council houses because that meant more Labour voters. The coalition should have been ended then and there. Just as in the 1990s when the Lib Dems leaned towards Labour, the party needs to accomplish the same feat now. It is much harder because Labour has abandoned the centre ground. But that is where the country is at.