Jeremy Corbyn – Page 2 – thinking liberal

The Labour Party is not dying, but it is in retreat

To judge by the stories coming up in my Facebook feed, you would think that Britain’s Labour Party was in its death throes. The party is further away from winning national power than ever, but it is far from dying. Something more subtle is happening.

The chatter arises from the two most recent parliamentary by-elections, where Labour’s vote has crashed. I have written about Richmond Park already – this was a straightforward squeeze to get the Tory out. A week later came Sleaford and North Hykeham – and this is much harder to explain away. This is a safe Conservative seat in Lincolnshire, which voted heavily for Brexit (unlike Richmond Park). The Conservatives lost a couple of percent in vote share, but Labour crashed by 7% to 10%, from second to fourth place behind Ukip (whose vote share fell by 2%) and the Lib Dems (who increased by 5% to 11%). Various other candidates scooped up an unusually large 11% (up 5%), including a Lincolnshire Independent who took nearly 9%.

The first thing to say about this result is that it is a remarkable victory for the Conservatives, a year and a half into this parliament. While Whitney and Richmond Park showed that pro Remain voters distrust the party, in pro Brexit seats (which are in a hefty majority in England and Wales) there seems to be no problem. It seems likely that they are picking up votes from Ukip, while losing a few Remainers to the Lib Dems. This seems to explain Ukip’s lacklustre performance in what should be home territory for them. But Ukip and the independents clearly picked up votes from Labour.

And thus come the predictions of Labour’s demise. Their lack of a clear message on Brexit, the main issue in British politics for the foreseeable future means that they are being squeezed by both the Lib Dems and Ukip, and will not be able to hold the line between the two. Voters sceptical of Brexit will be attracted to the Lib Dems; enthusiasts for Brexit will be tempted by Ukip or the Conservatives. Meanwhile Labour members’ attention is being drawn by its internal politics, as far left activists led by Momentum, fresh from their victory of re-electing Jeremy Corbyn as their leader, try to take control at all levels, and dictate the candidate selection process. The spectre of the party repeating the collapse it has already suffered in Scotland in England is raised. Amidst all the chatter, though, it was instructive to read Andrew Rawnsley in the Guardian. He describes how Labour veterans are consolidating their hold on the Labour organisation through solid, grassroots organisation. Momentum, an awkward alliance of veteran hard leftists (many expelled from Labour) and younger idealists freshly recruited to politics, is, in fact, losing momentum. Internal splits within the pressure group have been widely reported.

The truth is that in much of the country, Labour does not face a serous political challenge, and in a few places it is mounting a serious challenge to the Conservatives. The threat from from the Lib Dems is grossly exaggerated. The Lib Dems have barely begun to claw back their standing amongst both metropolitan leftists (who will not forgive the coalition with the Conservatives and the breaking of the party’s pledge on tuition fees) and working class voters of all ethnic groups. Richmond Park showed that such voters may once more hold their noses and vote tactically for the Lib Dems, but this logic does not affect areas where Labour is already strong. The Lib Dems seem to be mainly picking up Conservative Remainers – and that may help Labour rather than hinder it. Certainly in the area of London where I live the Lib Dem revival, such as it is, is evident in Tory areas, and there is no evidence of it all in the poorer estates.

Ukip threatens more, with an appeal to white working class voters, an important part of the Labour coalition. Labour seems unable to craft a message that appeals to these voters, or not without upsetting other important parts of the coalition, such as ethnic minority voters and metropolitan liberals. But Ukip is not a well-organised party. It lacks maturity. Furthermore its culture celebrates the awkward squad – the oddballs and angry types – from which it is hard to forge a cooperative team, as can be seen from the farcical attempts to replace Nigel Farage as leader. Liberals have a big advantage here – having a predilection to listen and cooperate. Ukip’s new leader, Paul Nuttall, is rightly focusing on Labour voters, but delivering a credible challenge will be an uphill struggle. They do not remotely present the scale of threat to Labour as the SNP have in Scotland.

And we must remember that Labour remains strong in large parts of the country, particularly London. They have plenty of members, strong local party organisations, and councillors. They have the ability to reach out to voters person to person to establish local bonds of trust. The party was not strong in either Sleaford or Richmond Park, so the results in these seats say little about how the party will perform in its strongholds. Around where I live the party is comfortably winning the local by-elections – and is as strong as I have seen it in 25 years or so.

So Labour is long way from dying. But it does seem to be in retreat in areas where it was not so strong in the first place. The Lib Dems do seem to be picking up here, resuming their role as the main challengers to the Conservatives in rural areas, to judge by a steady record of success in local by-elections (with another good set of results last night). As last week’s Bagehot column in the Economist points out, Britain’s political geography is fragmenting, with the country becoming a patchwork of different political contests. Labour will find it very hard to break out of its strongholds, as Lib Dems, Ukip and the SNP consolidate their hold on other areas.

Can Labour break out of this dynamic and regain a national appeal? It has been done before, in the 1990s by Tony Blair. The party’s current leadership, hopes to do so, with a re-launch promised. It hopes to pick up on an anti-establishment mood, using Mr Corbyn’s persona and a left-wing policy platform. We will see. Labour’s problem is less its policies than a perceived lack of competence, something that Mr Corbyn’s persona will do nothing to correct. The public may yet be attracted to radical left-wing policies in these strange times – but the platform is being developed in a process of members talking to themselves (which activists optimistically regard as “democracy”) rather than engagement with a sceptical public.

Meanwhile, the Conservatives have little to worry about from Labour. Their main worry is the internal tensions in their party arising from Brexit – a process that will be quite unable to sustain the expectations placed on it. As doubts over Brexit grow, the party’s support is bound to melt. That will be the big political opportunity. The Lib Dems and even Ukip are readying themselves for that moment. There is little evidence that Labour are. But the party is far from dying.

Corbyn’s victory shows that Westminster politicians are losing their grip

As expected, Jeremy Corbyn was re-elected as leader of Britain’s Labour Party over the weekend. Thus ended the attempt by the bulk of Labour’s parliamentary party to remove him. There is much comment in the usual places that this will be a disaster for the party, and by and large I agree. But we are missing the wider significance. Mainstream Westminster politicians are losing their grip on politics. Wise politicians will need to change tactics.

Ironically enough, the heart of the MPs’ challenge on Mr Corbyn was that he was incompetent. That may be true, but the MPs’ attempt to unseat him failed to show any serious political competence itself. It is interesting to speculate as to why professional politicians should be so comprehensively outmanoeuvred by the amateurs. Britain’s electoral system does not in fact encourage serious electoral competition by its leading politicians. Most MPs are elected to safe parliamentary seats – so the main political skill is getting selected in the highly competitive, but internal, process of choosing candidates. Advance after that comes through ministerial or shadow ministerial promotion, which is even more about schmoozing that cut-and-thrust. When faced with a serious electoral challenge amongst a mass audience, MPs are often ill-equipped. This was demonstrated dramatically by Labour in Scotland, rich in formerly safe Labour seats, when they proved quite incapable of handling the SNP surge in 2015. It is also why there is little prospect of the MPs breaking away to form their own party – they don’t have the nous.

This is not so true of the Lib Dems, whose seats are much more competitive, with an important exception. In 2005 many Lib Dem seats really were safe, and were successfully passed over to politicians with little experience of hand-to-hand politics. These included Nick Clegg, David Laws and Chris Huhne, who then proceeded to take over the party’s leadership in parliament. The former, at least, proved ill-equipped for serious political competition.

But it hasn’t just been the MPs who have been routed. Their professional advisers (who like to style themselves as “strategists”) have been proved wanting, for all their clever talk. The Lib Dems are sore about the coterie of advisers that Mr Clegg surrounded himself with. Labour Leader Ed Miliband’s fared little better in 2015. The Conservatives’ David Cameron clearly felt they had cracked it. Relentless negative campaigning had seemed to win the day in the Scottish referendum in 2014, and for the Tories in 2015. But it fell apart in the Remain campaign in the EU referendum, against a Leave campaign that was sparky but distinctly amateur. Meanwhile the rout of the professionals is being perpetrated by Donald Trump in the US, to say nothing of Mr Corbyn’s impressive victories in 2015 and 2016.

What accounts for this? Mainstream politics has lost its appeal. Perhaps it is too defensive. By and large the easy way to win elections is to undermine your opponent – but this has the long-term effect of undermining all politicians. Then there are the inevitable compromises of office, as the complex problems of the modern world will not yield to quick solutions. And the checks and balances of democratic politics mean that politicians have to cooperate with people they disagree with in order to get anything done, be that within parties or between them.

And then there is the fact that economic development does not seem to be going so well in the developed economies. Globalisation and technological advance helped roll back poverty in the developing world, and raise living standards for many in the rich countries too, but there were significant losers, who feel let down by their leaders. Then there was the economic crash of 2008/09, which showed that much of the economic growth in the previous decade was a mirage. Since then the developed world has been stuck in a period of low growth that mystifies economists – though many explanations are offered (poor macroeconomic management; inequality; the wrong sort of technology; demographic changes; reversing gains from trade; too much regulation; too much greenery – each has its fans). Confidence that mainstream politicians know what they are doing drains away.

And people are getting fed up. Exploiting this fed-up-ness lies behind the success of the amateurs, like Mr Trump, Mr Corbyn and the Brexit campaign. This has a very dark side. These campaigners may be sparky, but their main weapons are destructive memes, which bear little relationship to the truth. Indeed it is often referred to as post-truth politics. It doesn’t seem to matter what Mr Trump or Mr Corbyn says, his followers lap it up. Many of them know that a lot of it is untrue, but they love to give the other side a beating. That may be a bit harsh on Mr Corbyn, who is nowhere near the Trump or Brexit league of untruth, but his supporters seem unable to engage with adverse evidence, especially about the electoral appeal of their policies. The rise of modern media makes it very easy to live in a bubble of like-minded people who avoid checking their beliefs with reality. It is ironic that these same people accuse professional politicians of being in a bubble of their own. Actually polling, focus groups and various other techniques of politics make modern politicians more informed about popular feelings than most. It doesn’t help.

What to do? All this brings to mind Visconti’s film of Lampedusa’s novel The Leopard about the struggles of the Sicilian aristocracy during the Risorgimento (and perhaps my favourite film ever): “Everything must change so that everything can stay the same” says the leading character.

Some, like the FT’s Janan Ganesh, urge staying true to old-fashioned, pragmatic politics that the Conservatives have made their own. That is unappealing for those on the liberal left and centre. It means giving ground to the narrow-minded.

Instead I have to draw deep on my liberal optimism. Deep down people understand the truth, and will put up with lies only for so long. That is how Soviet Communism was destroyed. It is why the BBC brand remains so strong – look at the hoo-ha over Bake Off. Liberal politicians must stick with it: don’t play the dark forces at their own game.

But they must do more. They must be exciting again. They must discover new ways of tackling the modern world’s problems, and sell them to the public. To be fair to Mr Corbyn, this is part of his appeal, though he harnesses the dark, post-truth side too, and a lot of his ideas look like 1970s nostalgia. But some of his supporters seem willing to search for new ideas. Never has this been so important.

Slowly the liberal left is finding these ideas. A new constitutional settlement for more inclusive and devolved politics. An economy less dependent on big corporations. Environmental sustainability being at the centre of the way we think, rather than endless attempts to expand consumption. Education for all that promotes modern skills and wellbeing. Public services that solve human problems rather than applying inappropriate big-industry models. Celebrating cosmopolitanism rather than give in to inward-looking nostalgia.

This thinking has to be finished and turned into an exciting synthesis that people from across political parties can take up, and which will appeal to the sceptical. Bridges must be built between the more open of the Corbynistas, the Labour centrists, the Lib Dems and the Greens – and not forgetting liberal Tories and Nationalists too. Surely that is our best hope.

The rise of Labour’s hard left reflects the weakness of the soft left

I am no fan the British Labour Party. I have spent years enduring its arrogance and tribalism; I would not mind terribly if the party did not survive its current crisis. There is a temptation to gloat over its predicament – though this would be a distraction from the important political questions of our time. But it is more important to reflect on wider lessons for the political left.

Labour’s immediate problem is that their leader, Jeremy Corbyn, has no idea how to lead a political party, even if he were inclined to lead it in a sensible direction. To understand the depth of his failure I would point to two articles by former supporters. First from the Guardian journalist Owen Jones is getting a lot of attention right now; but what really shocked me was this from Richard Murphy, who developed Mr Corbyn’s economic manifesto last year, when he was running for the Labour leadership. And yet Mr Corbyn remains very popular in the party’s mass membership, much of which has only recently joined, who seem convinced that he represents a new kind of politics, and that criticism arises from malign forces. And that is enough to keep Mr Corbyn secure in his role.

As a convenient shorthand I will call Mr Corbyn and his supporters the “hard left”, though it is in fact a more complex fusion of old and new leftist trends than this name suggests. The word “hard” suggests its uncompromising attitude towards the political and business establishment, and its rejection of the conventional methods of politics. It compares with two other loose groupings. First are centrists, who held sway in the late 1990s and 2000s under former leader Tony Blair. These combined an embrace of global capitalism with a broad role for government intervention, albeit using quasi-market structures much of the time, and with a contempt for intermediate levels of democratic intervention below national government. The centrists made a successful pitch for formerly Conservative voters, giving the party power from 1997 to 2010. And yet the left of the party felt betrayed by its compromises, and especially by the Mr Blair’s support for the Iraq war in 2003.

In between the centrists (otherwise referred to as Blairites) and the hard left stands what outsiders call the “soft left”. I’m not sure if they would be happy to use that term themselves, they might prefer “liberal left”, but it seems to me highly appropriate. The soft left want to have the best of both worlds: drawing on the anger felt by the public sector workers that are the core of the hard left, while still wanting to achieve and wield political power through conventional political processes. The soft left became the dominant Labour faction under the leadership of Ed Miliband, after Labour lost power in 2010 until last year’s general election. It still forms most of Labour’s parliamentary party, and it is trying to oust Mr Corbyn as leader.

The success of the hard left reflects the weakness of the centrists and the soft left. The centrists are now a busted flush. The financial crash of 2008 exposed the hollowness of their achievement; the economy was not robust enough to support the level of public expenditure they favoured. Meanwhile their economic policies seemed to favour an affluent minority. While they might use government agencies to redistribute much of the wealth, what was required was decent jobs in poorer parts of the country. The Conservatives took over much of their governing ethos.

The soft left are no better, and that goes to the heart of Labour’s problems. They have no more idea about what to do than anybody else; the hard left doesn’t have much idea either, but is able to focus its energies on being against things instead. They nevertheless focus hard on what they have to do and say in order to win back political power. Under Mr Miliband this took the form of endless re-launches as they tested out one half-baked idea after another. By 2015 they ended up with an election manifesto that was generally centrist. Its core fiscal policy is in the process of being adopted by Theresa May’s new Conservative government, along with many other policies and priorities. But in order to coopt the anger of the hard left they had to dress it up as something more radical. This is what, in another context, the Economist calls “homeopathic politics”: the adoption of radical policies in minute quantities in the hope that it will create a positive aura by association. The Economist framed this idea to describe the way the American right tries to tap into the anger of the working classes at globalisation. Its warning was that it always backfires, as it will never satisfy the people that it Is trying to appeal too. In due course it led to the capture of the Republican nomination by Donald Trump. Something similar has happened to the soft left.

The soft left have compounded their problems by changing the leadership election rules so that not only is the mass membership in control, but they are boosted by temporary members (though they are trying to backtrack on this now). Two muddled ideas seem to be behind this. The first was that broadening the franchise for the leadership battle would make the selectorate more representative of the country at large; a quick glance at US primary elections should have shaken them out of that. Second was that the soft left could ride the tide of left wing anger at “austerity” and “neoliberalism”, the abstract ideas that the hard left choose to obsess about. But they have been outgunned by the hard left.

Meanwhile soft left MPs have shown little backbone. Their chosen challenger to Mr Corbyn, Owen Smith, was almost unheard of outside Labour circles, and even he required another MP, Angela Eagle, to break cover and make the initial challenge. The best qualified MPs to be leader are keeping a low profile.

The political misjudgements and the lack of backbone are signs of a wider weakness – a failure to develop distinctive political ideas of their own with which to excite the country at large. Owen Jones’s article, linked to above, takes the form of a series of questions to which he feels Mr Corbyn’s supporters have no convincing answer. But the soft left would struggle with exactly these questions.

This vacuum of ideas on the left is not unique to Britain. It is why populists of left and right are doing so well in so many developed countries. It is why the left is in full retreat in Latin America too. Beyond the populists it is leaving the political space dominated by the centre-right, such as Britain’s Conservatives and Germany’s Christian Democrats. Developing new, liberal ideas on economics and democracy is now of the utmost urgency on the left. I wish more people were engaged in that exercise.

And it is the best hope for my party: the Liberal Democrats. It has flirted with both centrism and the soft left; neither will work now. But it is as close as anybody to the new ideas that will be needed to take our society forward. It should make development of these ideas its top priority.

But what are these new ideas? A topic for another day!

Subjecting MPs to party membership votes is not democratic

Yesterday the Conservative leadership election resolved itself as the final Brexit-supporting candidate’s campaign imploded, leaving Theresa May unchallenged. Labour MPs look on with envy, as their own leadership election officially got started on the same day, as Angela Eagle formally challenged Jeremy Corbyn for the job.

What both these contests had in common is that party rules give the deciding say to a vote of party members. It is the same for all Britain’s political parties. Back in the 1970s, when I came to political consciousness, such contests would be decided by party MPs alone. The Liberal Democrats (or its predecessor parties – I can’t quite remember how this evolved) were the first to move to an all membership vote. In their case, the parliamentary party was very small, and the party outside parliament relatively much more important. Participation in the party’s policymaking and leadership processes were designed to encourage people to join. Lib Dem activists describe this membership participation as “democratic”.

As membership of all political parties went into steep decline in the 1990s and 2000s, the other parties followed suit. Labour has done this with particular enthusiasm. Not only do they now put the leadership election to a full membership vote, but they allow the public to join as temporary members to take part. This extends the franchise to hundreds of thousands of people. The result last year was that Mr Corbyn was selected in a surge of enthusiasm from party members, charmed by the apparent freshness of his approach. This was described by his supporters as “democratic”. They still do. On the radio I recently heard one of his supporters use the words “democratic” or “democracy” in pretty much every sentence.

But Mr Corbyn never had much support in the parliamentary party, and he has not succeeded in winning Labour MPs to his cause. They have rejected him in an overwhelming vote of no confidence. And yet he clings on as leader, claiming that his “democratic” mandate trumps the views of MPs. This use of the work “democracy” to assert the primacy of party memberships is an abuse.

At the heart of any democratic system is the participation the public, or rather, a public. This public is not defined by personal preferences, such as voluntary memberships, but by some involuntary common factor – such as where they live. Excluding people undermines democracy. This makes it a messy, rough and tumble process. Without some kind of preselection process, there will be disagreements on most things. Unanimity is near impossible on large populations. Party memberships do not fulfil any reasonable definition of being “a public”. People join voluntarily, according to some understanding of shared values; they are essentially self-selecting. They may use democratic procedures to make decisions, but that does not make them democratic. The Labour selectorate is of an impressive size compared to other political parties, but it is still tiny compared to the population at large, and in no manner representative of that population.

This is one of the paradoxes of large-scale democracy. Political parties are essential to a healthy democracy, but they are not themselves democratic. They can only claim democratic legitimacy when they subject their candidates to a public vote. And that creates a tension for publicly elected representatives between the party that nominated them and the electors that voted for them. That tension is as old as political parties. It is a tension that has to be managed rather than resolved one way or the other. If a representative (an MP, say) ignores his party, then he is disregarding one of the most important things the public knows about him. But if he ignores the broader electorate, he is holding them in even deeper contempt.

The tension comes to a head when it comes to selecting the party leader, a position of enormous privilege in our political system. The MPs have a proper democratic mandate, and their cooperation is required in order for a leader to be effective. But in order to secure the commitment of party members, also very important for an effective political party, they must be given a say. Labour’s system for selecting its leader (courtesy largely of Mr Corbyn’s predecessor, the well-intentioned but lightweight thinker Ed Miliband) is based on wishful thinking rather than hard political calculation.

To most observers, it is quite clear that Mr Corbyn should step down, as a loss of confidence amongst MPs is fatal. The Deputy Leader should take over temporarily, while an open leadership contest takes place. Instead Mr Corbyn seems to view his MPs as traitors to the political movement he represents, and is clinging on, with every reason to expect that he will see off the challenge. There is some question as to whether he should only be allowed to re-stand if he fails to find 51 MPs or MEPs supporting him. But if he does not stand, there will be a huge rift in the party at large. As it is many MPs face de-selection.

The Labour Party is in enough trouble as it is. It somehow needs to reconcile three constituencies: middle-class public and third sector workers; white working class voters; and ethnic minority working classes. The white working classes in particular were strong supporters of Brexit, and feel alienated by the other two groups. And the party’s collapse in Scotland shows that its continued strength is not an inevitable fact of politics, as it used to think. But instead of confronting this existential crisis the party will indulge in a narcissistic battle of abstract nouns (austerity, inequality, democracy, etc.). They should be engaging in the hard graft of rebuilding community relations; listening rather than shouting. The prospects for the movement do not look good.

The Conservatives, meanwhile, seem to have a much stronger grasp of political reality. There was no nonsensical talk of “democracy” concerning the abortive final vote by party members. Their parliamentary party retains formidable powers in the selection of the leader (they whittle the field down to two candidates) and in holding the leader to account (they can eject the leader in a vote of no confidence). They will be very tempted to find a way of holding an early general election to complete Labour’s rout.

Core voters are always shafted. Politics is made in the centre. Bad news for Lib Dems

Democracy and idealism do not sit well together. Idealists have the motivation to form political parties and keep them going. But in order to win power the party must bring on board people and, policies, that the idealists disagree with, in order to win round those less committed to politics. And these floating voters come to matter more to the party’s managers than the the idealists. Because the idealists have nowhere else to go.

In Britain, the latest challenge to this process comes from Britain’s Labour Party; in America the Republicans seem to be doing something similar. This all seems to be part of the great cycle of politics. A party’s core supporters, those that are ideologically committed, get fed up with being taken for granted and rebel. They struggle to accept that a majority of voters disagree with them – following a natural human bias that most people think as we do. They may also be enticed by the idea that they can win by accident – through their opponents’ mistakes. Sometimes such ideological parties do win an election that way – it has just happened in Poland, for example. It rarely ends well.

I know more about the Labour phenomenon than the Republican one. Labour members elected the ideological Jeremy Corbyn after the party’s general election failure last year. These members remain as fervent as ever, and indeed new members have flocked in. This burst of enthusiasm has convinced them that they have started a new and better form of politics. As they see it, the compromises used to chase the centre ground, as uncommitted voters are usually referred to, have disillusioned people with politics. Now Labour will create a sharper narrative that will go down a storm with the electorate. They equate their own disillusionment with the compromises of their party with the widespread political apathy of the population at large.

But is this is an illusion. This week Britain’s polling organisations published a report into why they called the 2015 election wrongly. They overestimated Labour support and underestimated the Conservatives’. They found this was mainly because their samples were biased towards Labour. And that was because they were biased towards the politically committed, who were much easier to reach. This is a vulnerability of the quota sampling technique that the pollsters use. The less committed, or more apathetic, voters were much more likely to vote Tory.

This leaves more thoughtful Labourites with two headaches. The first is that current polls show the Labour vote holding up compared to the general election – so that electing Mr Corbyn at least hasn’t made things worse. But if the polling bias remains (and it seems to be, based on how the samples remember they voted in 2015), then in fact the Tory lead has grown. The second headache is that the army of the apathetic non-voters is more sympathetic to the Tories than many suppose.

Which leads to an inevitable conclusion. In order for Labour to win an election they need to convert people who voted Conservative last time, or who did not vote, but lean to the Conservatives. In other words, Labour must appeal to the centre ground.

Such thoughts cut no ice with Labour’s new members. When pushed they even suggest that winning is not that important. That leaves Labour in a terrible position, and the Conservatives thinking that they have the next election in the bag. Some hope that the European referendum will split the Tories. But the prospect of whacking Labour really hard if they hold together is the best possible incentive to hold the party together.

Labour’s prospects against the SNP in Scotland are no better; the SNP have cornered the middle ground in Scotland as masterfully as the Conservatives in England, while still retaining a substantial core vote. This conjuring trick will eventually come apart – but an ideological Labour Party will not be the instrument of the SNP’s demise.

Meanwhile, sitting on the sidelines are the Lib Dems. A number of people have suggested to me that Labour’s woes present the party with a golden opportunity. But the political dynamics or the core and centre are not working the party’s favour.

The party thought that the usual rules of politics would apply to them when they went into coalition with the Conservatives in 2010. They shafted their core voters, but surely they had nowhere else to go? And meanwhile the party’s record in government would appeal to the centre ground. But a large part of what the Lib Dems thought was their core vote felt they did have an alternative: Labour. That weakened the party, and weakness is a big turn-off for centrist voters. The Conservative campaign exploited this ruthlessly, and the result was catastrophe, as the Lib Dem vote fell by two thirds, and their political clout even further.

So, somehow, the Lib Dems need to rebuild their core vote. The place to look is amongst Labour inclined voters who do not buy Labour’s new sense of direction. But the party also needs to win votes back centrist voters from the Conservatives if they are to win the all-important parliamentary seats. And that means the party must show distance from the Labour Party. So how does the party face the prospect of another coalition with the Conservatives? If they rule it out, they will lose the middle ground by giving tacit support to the ideological Labour Party. If they don’t, those Labour inclined “core” voters will think that the party has learned nothing from the coalition debacle, and leave the party alone.

This may not matter too much to the party at the next election, especially if it looks as if the Tories will win handsomely. There will be no danger of a coalition, so that awkward question can be ducked. The Lib Dems might be able to make a modest recovery based on local strength. But the strategic dilemma remains.

Probably the best thing for the party is to recognise that it is essentially of the left, and rule out any future coalition with the Conservatives. That will help the party rebuild its core. It then needs to apply thought to under what conditions it could work with Labour. But it will have to be a very different Labour Party from the one emerging under Mr Corbyn’s leadership.

Which would leave the middle ground in British politics to the Conservatives and the SNP. Which in turn means that political power will rest with them. A grim prospect indeed.

Success in Oldham deepens denial among Labour left

Last week BBC Radio 4’s Thinking Aloud ran a piece on research showing how people assume that most other people think like them. This is, apparently, particularly strong at the political extremes. We don’t need academics to tell us this, of course – it explains many of history’s major political misjudgements. Prime candidates at the moment are supporters of the Labour leader Jeremy Corbyn, who are in deep denial about how difficult it will be for their party to win elections. In this, if nothing else, they resemble the supporters of Donald Trump in the US.

Of course, being in denial is something that, as a Liberal Democrat supporter, I know something about. Throughout the Coalition years we were told that our party faced oblivion at the next election. We refused to accept this, but alas we were wrong. Denial is always easier to see in others. The main problem on the Labour left is that they assume that most Britons share their view that the Conservatives are out only to line the pockets of the rich, and that “austerity” is evil. Now I’ve written before that this outlook will doom the Labour Party to failure, and that one of the first tests of the Corbyn leadership would be the Oldham by election. Well that election was last week, and it was a triumph for Labour. They increased their percentage share of the vote, though with less votes overall. A challenge from Ukip failed to materialise: they increased their vote (by 3%), but by much less than the Conservative vote fell (over 9%). Is this vindication for the Corbynistas?

Up to a point it is. It shows that all the chatter that Labour’s lurch to the left has affected the party’s electoral standing is just that. There is little decent data on this result, analysing who did and didn’t support each party, so we can’t say for certain what happened. But as Alistair Meeks points out in politicalbetting,com, the result is completely consistent with previous by elections in the area. Nothing much has changed. There is much for Labour supporters to take heart from here.

The first point is that Ukip look like a busted flush. The party was supposed to be picking up disillusioned white working class votes, and presenting a major threat to Labour in the north of England. They nearly won one of those previous nearby by elections. If Mr Corbyn did not play well on Oldham’s doorsteps, as the chatter suggested, Ukip’s Nigel Farage played no better. He used to be a media star, and regarded as “authentic”, but he seems to have lost his credibility. The Ukip result in the May General Election was disappointing, as they were mugged by the ruthless Tory election machine. Mr Farage’s shenanigans over whether he was resigning as leader may have had the same sort of effect on his public standing as Nick Clegg’s U-turn on university tuition fees. The party needs to dump him, but probably won’t. The transition from a Tory breakaway in the shires to being a party of working class protest is too much for it.

The second cheering point for Labour is that their challengers to the left are thoroughly neutralised. The Greens achieved barely 1% of the vote. The Lib Dems put in a major effort and still lost their deposit, and tried, unconvincingly, to draw comfort from the fact that their vote did not actually fall from a mere 3.7%. In this environment at least, these parties are treated as a complete irrelevance. In living memory the Lib Dems were capable of pulling off a stunning wins almost anywhere. There are some signs in local by elections of a Lib Dem bounce back, but it is highly localised and bypassed Oldham.

All this bodes well for Labour’s prospects in May 2016, the next big local polling date, when there are also elections to the Scots and Welsh parliaments, and London’s Mayor. Labour’s candidate for London Mayor, Sadiq Khan, has every chance of wresting the position back from the Conservatives. In Scotland, though, prospects look dire for Labour as the SNP machine looks dominant. It is even possible that the party will drop to third place behind the Conservatives. But London’s political class seems to have written Scotland off.

So why am I suggesting that Labour activists are in denial? Because May’s result in the General Election was terrible for them and there is not the faintest sign of it getting better – only that it is not getting worse. Their prospects in Scotland are not the sort of irrelevance that Londoners seem to assume. Scotland is one of the most important battlegrounds in British politics; it has been for at least five years. If Labour can’t engineer a recovery there, they will be locked out of politics in Westminster. Interestingly, the success of the SNP was a key piece of evidence for the Corbynista thesis – that the public was really angry about austerity, and Labour’s big mistake was not to be angry enough. But Scots voters turned on Labour because they thought they were incompetent, and did not stick up for Scotland. Mr Corbyn’s election does not improve their standing on either count, to put it generously.

Labour may be standing up well enough in the north of England, in spite of a cheeky challenge by the Conservatives to win back support there, but there is no sign that Labour can win back those politically sceptical middle-England voters that they progressively lost after Tony Blair stepped down as party leader. To do that Labour activists must break free of the notion that most people share their political outlook, deep down. Meanwhile a dangerous rift between the parliamentary party and the leadership reinforce a general air of incompetence, the most fatal thing in politics.

I have heard a number of people suggest that the real winners of Oldham are the Conservatives. It is hard to disagree.

Osborne uses an accounting trick to implement People’s QE

When Jeremy Corbyn, was running his successful campaign for the leadership of Britain’s Labour Party, he floated the idea of “People’s QE”. “QE” stands for Quantitative Easing, the means by which central banks try to loosen monetary policy in an economy without reducing interest rates – handy when interest rates are near zero. It attracted quite a bit of attention from economists, much of it quite approving. That is because the idea touches on one of the most important aspects of modern economic policy: the suggestion that governments can sustain quite big deficits simply by “printing” money. In the end we find, not for the first time, that the current Conservative government acts much further to the political left than it talks, as did its Conservative-Liberal Democrat predecessor.

Back in the 1980s, when monetary policy first became the height of fashion, we had uncomplicated views about what it was about. Although most money was in bank accounts, economists painted a picture as though it was all in notes and coins, and the various actors behaved as if they were kids spending pocket money (and even then was probably too simplistic…). They talked of a “money supply”, which could be manipulated, and the size of which affected spending behaviour. We are older and wiser now, though many economists and journalists still talk about “printing money”, even though physical money has almost no role to play, and bank accounts are different in very important ways. Even trained economists who should know better sometimes trip themselves up in this way. For example there is much excited talk about how commercial banks create money rather than the central bank – which turns out to be a red herring on reflection [That link from Paul Krugman includes a broken link to a masterful essay from James Tobin in 1963, read it here]. It is better to look on monetary policy as a series of policy instruments under the control of the central bank, which have not entirely knowable effects on the economy at large.

The most important of these instruments is the short-term interest rate the central bank charges to commercial banks in their interactions with it. These ripple right through the economy. But when they are very low, as they are now in the UK, it is very hard to lower them further. Some European banks are using negative interest rates without the sky having fallen in, but these negative rates aren’t very high – fractions of a percentage point. So how to “loosen” policy – that is encourage a greater level of economic activity? Here the invention of QE comes in, pioneered, as so much of modern policy, by Japan in the 1990s and early 2000s. This is often talked of as if it means printing physical money and handing it out to the kids to spend on sweeties. What it actually means is that the central bank goes into the market and buys bonds, usually government bonds, like British gilts.

How does that help? Well the people who held the bonds now hold cash instead, which they should spend on something else – which might include new capital investment, after it has changed hands a few times. And it might reduce bond yields, which will reduce long term interest rates right across the economy, and increase asset prices. This creates a “wealth effect” that might encourage the mass affluent to spend a bit more money on stuff that people make. Or all that could happen is that there is a merry-go-round of money chasing various flavours of pre-existing asset to create an asset price bubble. It’s not very clear what has happened to the Bank of England’s QE over the years. The bank produces various statistical associations as evidence that it has helped stimulate the wider economy. Others are sceptical.

Which is where People’s QE comes in. What if, instead of buying government bonds in the market, the money went into extra government spending, such as infrastructure investment, or even current spending. Because the Bank controls the currency in the UK, it can fund the government’s deficit without the need to borrow money from investors. It borrows money from itself. This amounts to supporting looser fiscal policy (i.e. government tax and spend), which should provide a more predictable stimulus to the wider economy.

Mr Corbyn’s advisers developed the idea with the suggestion of administrative structures to channel the extra money into infrastructural investment. This puzzled some economists. There is no need for such engineering. All the government has to do is spend the money, increasing its deficit, issue bonds as normal, which the Bank of England then buys in the existing QE programme. If the Bank is buying bonds, the government is less beholden to the bond markets. In Japan, which has been practising QE on a massive scale, the government now issues little net debt to the bond markets, making large deficits sustainable.

But how does this work? Surely it is something for nothing? The answer to that is that it only works if there is slack in the economy, and the government steps in to create demand because businesses are investing less than the public is saving, creating an imbalance. If this is not the case, you can get inflation, which is what happened to Germany and Austria in the 1920s, Zimbabwe more recently, and is happening in Argentina now. Alternatively you get a asset price bubble. Which in the modern, globalised financial and trading system is in fact more likely for developed economies – though this seems to be a blind spot for many economists, who think that asset markets are too efficient for that.

But in the developed economies, including the US, the Eurozone and Japan, as well as the UK, there does seem to be scope to do this kind of stimulus. There is a lack of business investment, while, it appears, too much money ends up in the hands of rich people, who don’t spend it. Nobody knows how long-term this problem is, but it does look as if large government deficits are much easier to sustain than before. If the bond markets refuse to fund all of the deficit, then central banks can simply “print the money” as the popularisers would put it. Prominent British economist (Lord) Adair Turner (whom I am something of a fan of) suggested that this could be a long term policy in a recent book.

In Britain there is an accounting wrinkle which is having an important impact. The Bank buys government bonds, but it holds them rather than cancelling them, so that it can sell them should it want to tighten policy. So the government still pays interest on the gilts the Bank holds, and this used to count towards the publicly declared deficit. But the Coalition government changed the rules, so that it does not count the interest on the Bank’s holdings against the deficit. That reduces the fiscal deficit and allows the government to spend money on other things instead. Also the effects of QE on longer term gilt yields reduces the deficit projected by the Office for Budget Responsibility (OBR), which plays such a pivotal role in longer term government spending plans. According to the FT’s Chris Giles £22.4bn of the £27bn that the Chancellor, George Osborne, “found” to allow him to loosen austerity measures in the Autumn Statement resulted from these accounting tricks. This boils down to People’s QE, and Mr Osborne used it to fund his U-turn on tax credit cuts, amongst other things.

The problem, as Mr Giles points out, is what happens when the Bank feels the need to tighten policy in, say, a year or two’s time? Then the whole thing goes into reverse. Politicians have seen gain in blurring the distinction between fiscal and monetary policy. That could return to haunt them, at both ends of the political spectrum.

Jeremy Corbyn has been holed below the waterline

The metaphor of a ship holed below the waterline is an engaging one. Above the surface nothing much seems wrong – perhaps a minor list. But down below the water is pouring in; barring extreme good fortune the ship is doomed. I remember using it in 2007, when the world’s interbank markets froze over; the ensuing collapse of the banking system did not happen until over a year later, when Lehman Brothers failed, though a surprising number of people did not see it coming. I think the metaphor is just as appropriate for Labour’s new leader: Jeremy Corbyn.

Many wrote Mr Corbyn off from the start, as a far-leftist, backed by trade unions promoting fantasy economics. These were my instincts, but I tried to give him the benefit of the doubt. He sparked real enthusiasm amongst hundreds of thousands of activists. He came over as an engaging, anti-politician – a nice chap. With the public so tired of the usual type of politician, might he not spark enthusiasm amongst the wider public? Hearing him occasionally on the radio, he seemed to be talking a lot of sense. He had real momentum. You could put a positive spin on most of what he said.

Of course there were doubts. His Shadow Chancellor John McDonell’s inept handling of the government’s fiscal plans did not bode well. There is something chaotic about the party under his leadership, with no coherence across the Shadow Cabinet. But that sort of thing happened to Mrs Thatcher in her early days too – and look what happened to her. And I did not take much notice of those putting it about that next year’s elections, in Scotland, Wales, London and local councils, would be a critical test. Mr Corbyn was enjoying his new job, and his backers were determined to consolidate their hold on the party. I thought he could weather one set of bad results at least. Politicians are expert at finding somebody else to blame; no doubt the left would simply blame die-hards from the old order.

And then came the Paris attacks. The public regards these things as a critical test of political leadership. There is a lot of fear out there. Could something like that happen here? Can we not holiday in safety in European capital cities? We want leaders who can express our outrage, provide reassurance, and take charge of stopping the bad guys. The FT’s Janan Ganesh suggests that the public’s insecurity might make them seek older, more experienced politicians, especially ex-soldiers – in place of the callow think-tankers, PR types or charity workers that currently dominate the political ranks.

What they do not want are the intellectual prevarications we have had from Mr Corbyn in the last few days. He suggested that the killing of British terrorist Jihadi John by drone attack was not as good as bringing him to justice in a court. He failed to dissociate himself from Stop the War Coalition, which he used to chair, when it suggested the the French were reaping what they had sowed. He professed his nervousness about a police shoot-to-kill policy, when the public carried mental pictures of gunmen in suicide vests firing indescriminately. He seemed to rule out attacks on Islamic State in Syria (or Iraq come to that) by the British military.

The point isn’t that these views are without validity. Extra-judicial killing makes many feel queasy – and making martyrs, with all the risk of killing innocents alongside them, is no substitute for the grinding humiliation inflicted by judicial process and punishment. Our politicians have often suggested that the country’s interventions in the Middle East are designed to make our streets safer; that is open to challenge, to put it mildly. Trigger-happy police kill innocent civilians – as Londoners well know from 2005. It isn’t clear how bombing IS target in Syria will help.

But now was the wrong time to raise these concerns. They smack not just of qualified outrage, but of indecisive leadership that will be no match for the hard men (and women) that want to kill us. Unless Britain becomes an unexpectedly more secure and optimistic place, the vast majority of the British public will take fright at the idea that Mr Corbyn could be Prime Minister. The best that could be said of him is that he is too nice for the job. It was bad enough in May when Ed Miliband didn’t look Prime Ministerial enough; this is infinitely worse. In the full heat of a General Election campaign, Labour would be lucky to hold onto seats it had previously considered safe. What happened in Scotland could be repeated across England and Wales. The Conservatives, Ukip, or even the Liberal Democrats could clean up.

And yet SS Labour sails serenely on. Labour MPs know they are in trouble, but apart from an outburst at an MPs’ meeting on Monday they don’t feel they can do much about it- Mr Corbyn’s support amongst grassroots activists is too strong. Those activists are in denial, dismissing these difficulties as a bit of a wobble. They can’t possibly admit they have been so wrong only a month or two ago.

But the party is in serious trouble. I think there will be three key arenas in which this drama will play out: Scotland, London and the old industrial heartlands of England.

Labour must win back Scotland from the SNP in order to regain power in Westminster. Mr Corbyn’s supporters claimed that he was the right man to do this, interpreting the SNP’s rise as a backlash against austerity, rather than against rampant incompetence. But the SNP leader, Nicola Sturgeon’s handling of the Paris outrages has been assured, even promising an open mind on bombing Syria, in spite of her party’s conference resolution against it. Labour do not look like a serious government in waiting in Scotland, and they are sure to be routed in next May’s elections to the Scottish parliament. That will a a hard failure for the left to gloss over.

London holds its Mayoral and Assembly elections next May too. The interest here is that London is the biggest stronghold of Mr Corbyn’s activists. If there is to be a pro-Corbyn surge, it will start here. But Zack Goldsmith, the Conservative candidate for Mayor is well-funded, and has hired top-rate campaign advisers, fresh from the Tory General Election victory. He wants to win and will pull no punches – even if other Tories would happily give Labour a run here to keep Mr Corbyn in place. If Labour do badly it will be devastating for their future prospects – though Mr Goldsmith has weaknesses of his own, and it wouldn’t do write off Labour’s Sadiq Khan just yet. He certainly gets my second preference over Mr Goldsmith.

But perhaps the most interesting battleground will be in England’s northern and central heartlands: Manchester, Leeds, Birmingham and so on. Many of these cities are virtually Labour one-party states. But interestingly a number of local leaders are taking a pragmatic and enterprising line to power. They support local devolution and are prepared to work with the government on that basis. And yet Labour’s working class voters will be amongst the most distrustful of Mr Corbyn’s metropolitan ways – and outraged at his recent prevarications on security. An early test of their feelings will come in a by election in Oldham in December. Ukip, anxious to overcome their disappointments in May, scent blood. Even the Lib Dems, with their Lancastrian leader, Tim Farron, are putting in an effort. This will be an interesting election to watch. If Labour fare badly in these heartlands, an anti-Corbyn coup is surely only a matter of time.

And what will happen when the good ship Corbyn finally keels over and sinks? That’s another matter, but Labour’s problems would hardly end then.

Corbyn’s moral crusade leaves too many questions unanswered

On Tuesday afternoon I did something for the first time ever. I watched a Labour leader’s conference speech. I had been encouraged by the advance billing that it would not be a long one. It lasted a full hour, so on that count I was disappointed. But what to make of it, and the revolution that has overwhelmed Britain’s Labour Party?

The first point to make is that its delivery was very low-key – which is entirely what we had been led to expect. Jeremy Corbyn wore a jacket and tie, but not a suit; and his tie wasn’t quite done up. His delivery was quite flat, and he often stumbled over his words. He was unable to deliver humour successfully. The speech itself rambled a bit – a bit of a struggle for me to concentrate completely at that time of the afternoon. But this is all very novel, and designed to show an unspun “authentic” politician, who is a nice man to boot. He had a rather lovely knowing look which he delivered from time to time in brief pauses. The contrast with Lib Dem leader Tim Farron’s speech last week, a much sharper and high octane affair, was very striking. Each is playing to their strengths, and not being rammed into uncomfortable poses by expert advisers.

A couple of things about its content are worth noting. He delivered a strong attack on the Conservative government’s economic policy, describing the shallowness of its supposed success. In this he was picking up from Shadow Chancellor John McDonnell’s speech the previous day. Labour is trying to establish a strong economic narrative to rival the government’s – and one that will garner support from respectable, mainstream economists. Unlike Mr McDonnell though, he said nothing about how Labour would deal with the country’s finances. This was all of a piece with his speech – rallying his supporters by stoking up moral outrage, but not trying to challenge them by hinting at hard choices ahead.

A second point is worth noting: he gave a lot of time to international affairs. I don’t think many previous leaders did this. This may be because he has a bit of form associating himself with international campaigns, not all of them entirely respectable. He made it plain he was for upholding human rights and against warmongering. He condemned Saudi Arabia in particular, and opposed military intervention in Syria. He did not, of course, attempt to tackle rather trickier issues, like Israel-Palestine or human rights in Venezuela, where he has a record of supporting its leftist regime. But this internationalist theme is a striking area of common ground with liberals.

For the Labour Party itself, Mr Corbyn said that he wanted to encourage internal debate, and not worry too much about how this is portrayed in hostile media. He made clear his opposition to the Trident nuclear weapons system, without seeking to impose it on the party as a whole. He also called for political debate to be carried out in in an open and civilised way, in a kinder more caring form of politics – not just within the party, but outside the party too. This gave rise to a standing ovation – though it is possible that this was because his audience mistook it for the end of the speech. Judging by a number of people sneaking out towards the end, the Labour delegates were as misled as I was about the length of the speech – and no doubt some had trains to catch. Those of us outside the party, who have witnessed the tribal abuse dealt out by Labour supporters, will believe any such change in style when we see it. One suspects that they can’t see the difference between plain speaking and throwing insults. Indeed the very next day Deputy Leader Tom Watson described the Liberal Democrats as a “useless bunch of lying sellouts”, among other things. So much for that then.

The whole thing made a lot more sense to me after reading Peter Kellner’s article in the New Statesman, actually written before the speech. In it he points out that by tradition Labour presents its cause as a moral crusade (or jihad if you are a Muslim, though I doubt that Labour politician has been brave enough to use that word!) – and not as a class struggle against capitalism. This helps mask the party’s attitudes to capitalism, which vary from outright hostility, through grudging tolerance, to positive enthusiasm. Mr Corbyn’s speech was firmly in this tradition – morality ran right through it. And it did not take a stand against capitalism – indeed he suggested that small and medium sized businesses should have better access to credit, albeit through a nationalised bank.

And it has to be said that the new Labour party does not seem to be playing to the hard left traditions that many of us were familiar with in the 1980s. The emphasis is on members setting policy in a bottom-up, “democratic” process. I put “democratic” in quotation marks, because a self-selected minority using voting procedures to determine their direction is a far cry from democracy – but Lib Dems adopt the same conceit. Nevertheless this is a long way from party activists acting as a revolutionary vanguard, and setting policy as generals choose lines of attack in real wars. I am told this is “democratic socialism”. Of course, this sort of inclusiveness is quite characteristic of the early stages of leftist revolutions – but I think Mr Corbyn genuinely means it. Some of his supporters may not.

The trouble for the rest of us is this. The shopfront may be a moral crusade that is quite attractive, and behind it may be inclusive and open party processes. But so far all this has produced is a blank slate. And with blank slates there is a tendency to project your wishes onto it. Old-left anti-capitalists think the party stands for nationalised industries and intrusive political leadership. Some of the younger recruits surely think it stands for something more liberal. But outsiders do not know what, in actual, concrete terms, the party stands for.

And based on what Mr Corbyn has said of his own beliefs, and what many of his trade union backers have also said – and what both of these have not said – there is every reason to think that what Labour will eventually come to stand for will not be at all liberal. They do not seem to believe in free markets; they are suspicious of the devolution of power; they do not appear to believe in electoral systems that foster plurality rather than polarisation.

And if the moral crusade turns out not to be based on liberal principles, it will merely consolidate power amongst a different, and likely even narrower, political elite. Until Labour moves off its moral high horse and gets its hands dirty, I will withhold judgement, even if I afford them some benefit of the doubt. Meanwhile I am not tempted to move away from a political party whose liberal principles are not up for debate.

Labour changes the meaning of austerity

So far, so good. That’s my verdict of the remaking of Labour under its new leader, Jeremy Corbyn. I’ll say more about the big picture later in the week, after Mr Corbyn’s speech later today. This time I want to focus on economics and the performance of the Shadow Chancellor, John McDonnell, who spoke yesterday.

Like Mr Corbyn, Mr McDonnell is a serial rebel and a political outsider – and he is very much Mr Corbyn’s right hand man. That is why he was given the job of Shadow Chancellor over the much more politically correct Angela Eagle. Both Mr McDonnell and economics are central to the Corbyn project.

The first thing to note is the new regime’s ambition in taking on economics. The previous leader, Ed Miliband, was a bit embarrassed to talk about economic policy. He did not try to defend the previous Labour government’s economic policies, nor seriously criticise them for matter, in spite of the opprobrium being dumped on them by the coalition parties. He was late in developing his own economic proposals, and when these came out, they appeared to be “austerity-lite”, and not seriously challenging the government’s narrative.

Mr McDonnell, on the other hand, wants to take control of the economic narrative. He is enlisting the help of heavyweight economists to both support his own plans, and to undermine the government’s version of events. In this he is capitalising on a remarkable fact. Academic economists have been very critical of government policies and “austerity” generally. Indeed government policy seems to be more based on 200 years of Treasury orthodoxy than modern economic insight. This is an opportunity to undermine the government’s reputation for competence, and make it look ideological.

Labour is still left with the two paradoxes of anti-austerity economics that I referred to in a previous post. The first is that by opposing austerity Labour will have to make its peace with the global financial markets that it so despises. Mr McDonnell tackled this head-on in his speech, and in an interview with the Guardian newspaper last weekend. He has nominally adopted the government’s trajectory for reducing the UK’s fiscal deficit, with its aim of bringing it into surplus by 2020. With a huge rider: he will exclude borrowing to fund capital investment. Depending on how loosely “investment” is defined, this is perfectly sensible public policy, and not, in fact, very different from Mr Miliband’s. It reduces dependence on international finance – remembering that the Bank of England’s Quantitative Easing policies may come to the government’s aid if the economy takes a turn for the worse.

There is, of course, a problem. It means signing up to austerity as most people understand it. And yet opposition to austerity remains his rallying cry. One of the many weaknesses of the left is its love of abstract nouns, especially as things to oppose – austerity, neoliberalism, inequality, and so on. Ordinary working people don’t understand what they are on about, but the activists work themselves up obsessively – and at the moment austerity is public enemy number one. But Mr McDonnell and Mr Corbyn have an ingenious answer to this: just change the meaning of “austerity”.

To them, the word now applies not to tightening the government’s finances overall, but to cuts and tax rises that might affect low and middle income workers. There will be cuts, said Mr McDonnell, but not to the numbers of policemen, nurses or teachers. Instead the cuts would be to “corporate welfare” – tax breaks to businesses, as well as raising taxes on the rich. He was careful not to be too specific about all this.

There are some pretty solid grounds for scepticism here. Mr Corbyn has brandished the figure of £93 billion for corporate welfare, a figure conjured up by the Guardian. Mostly these are allowances or direct support for investment, exports and research and development – all things Labour will want to encourage. And the small print of the Guardian’s report suggests not that this is low hanging fruit waiting to be plucked, but that it is, to switch metaphors, a rather overgrown hedge that can be trimmed a little. There is reason to doubt how easy it will be to target other measures to raise taxes, or clamp down on avoidance, without collateral damage to the small and medium sized businesses that the economy so needs. This is what undid Francois Hollande’s Socialist government’s attempt to do much the same thing.

But it isn’t nonsense either. Big business, and the pampered elites that run them, are not a benign force these days. They contribute to the hollowing out of much of the economy by destroying middle ranking jobs and sucking the soul out of towns and villages away from the main commercial centres. They also siphon profits out of the economy rather than reinvest them. Labour will do well to be wary of big business, unlike the earlier regimes of Tony Blair and Gordon Brown. But finding policies that will tilt things against big business without damaging the wider economy will not be easy. I think that tax treatments for intellectual property and debt interest are a better place to look than the Guardian’s corporate welfare list. And international cooperation on corporate tax avoidance will help (especially if we can move to unitary taxes, such as the US states apply among themselves). But such policies will take time.

All this takes us into the territory of my second paradox for anti-austerity economic policy. It calls for more economic growth, and yet bears down on much of the private business that will be needed to generate it. This will be the next challenge for Mr McDonnell and his colleagues. It is fair enough to bear down on many businesses, especially the giants. But Labour also needs to show encouragement and support for more positive businesses, through investing in support infrastructure, improving access to credit for genuine investment, improving public procurement, and through reducing the burden of petty regulation. As yet I see no sign of this – but it is early days.

I remain highly sceptical of the new Labour project. But its leaders have made a competent start, and there is undoubted fresh air. The floor is still theirs.