Lib Dems – thinking liberal

Britain’s politicians are in denial – are the voters?

From the Office of Budget Responsibility: Economic and fiscal outlook November 2023

This week’s Autumn Statement by Britain’s Chancellor of the Exchequer, Jeremy Hunt, was a miserable affair, full of political chicanery with little to effort to tackle the country’s deepening problems. Worse yet, the opposition parties (Labour and the Lib Dems anyway), for all their huffing and puffing, are also unable to face up to these problems.

The Conservatives billed the set of measures as the biggest set of tax cuts since the 1980s. And yet the overall tax burden is rising as the freezing of tax allowances and thresholds will bring ever more people into tax or higher rates of tax, and increase the proportion of income people pay as tax. An even bigger problem is that the government has been using inflation to squeeze public spending, while services across the board – health, education, the police, the courts, and the list goes on – are clearly overstretched and in many cases breaking down – with collapsing buildings and rising waiting lists. The Chancellor offered not a penny to alleviate this crisis, while planning a further squeeze in the years ahead. Labour and the Lib Dems gleefully pointed out the first problem, but failed to address the second. They will stand by the announced tax cuts, while offering only gestures (taxing non-domiciled residents, or private schools, for example) to help fund public services. These tax-raising wheezes are nowhere near enough to match the scale of the crisis. Meanwhile all parties suggest that a bonanza of economic growth is coming to the rescue, without acknowledging the severe headwinds that will limit the country’s long-term growth prospects.

I am also highly sceptical of the one measure that seems to be getting widespread support – the full expensing of investment in machinery and systems against corporate profits. It is said that this will boost business investment, which is sorely lacking. It is in a fact the revival of a policy that failed in the 1980s, and was abolished by Nigel Lawson, the Tory tax-cutting Chancellor, who has been about the only holder of that post in memory that had a grasp of how the tax system as a whole worked and could be reformed. Back then it created a tax-avoidance industry and encouraged wasteful investment with fancy kit, rather than the thinking through of business processes which is the real key to improved productivity. That fiasco occurred at the beginning of my professional career as a Chartered Accountant, where I could see the nonsense it was creating up close. Alas the current crop of politicians and their advisers are too young to remember this. And it is of little use to new businesses, where the need is most acute, as these typically do not generate enough profit for this to be of use. What a silly waste!

Meanwhile the fiscal climate is getting a lot worse. Interest rates are rising at time that the size of the national debt is historically very high. If interest rates are higher than the overall rate of growth, and there is a budget deficit, then a debt spiral threatens, which, if it leads to an international loss of confidence in the public finances, could usher in a severe financial crisis. At the moment it is actually quite hard to understand how much of a problem this is. You should be comparing real interest rates to real growth rates – i.e. after inflation. But there are mixed signals on real interest rates. If you compare the nominal rate on government lending, it is if anything less than reported inflation – indicating a negative rate. But yields of index-lined bonds are positive and have risen sharply. Meanwhile the budget deficit is quite high – at 4% of GDP. It wasn’t so long a go when none of this seemed to matter. Interest rates were low, and the Bank of England’s Quantative Easing (QE) programme made large government debt look manageable. But conditions have changed. Inflation has made money much tighter – with interest rates rising, and QE going into reverse. I am starting to suspect a deeper change is afoot in the world’s capital markets. Earlier this century a number of countries ran large trade surpluses – notably China, Japan and Germany. This made trade and budget deficits more stable in countries like the UK and US, as the surplus countries had plenty of spare currency to provide funding. As the world’s trading environment is getting more difficult, this may changing – though it is not yet evident in public statistics. After over-reacting to fiscal risks in 2010, and moving into austerity too quickly, the opposite risk beckons. But the Autumn statement proposes tackling the budget deficit only slowly, leaving the very high level of net debt virtually unchanged. Politicians seem to assume that as inflation comes down things will simply go back to the easy financial environment that pertained before. This is complacent.

More from the OBR report – government plans make little impact on public debt

If that is complacency, the politician’s attitude to economic growth is outright denial, though some economists who should know better seem to be in the same place. It is assumed that the UK’s poor performance has an easily fixable cause. More investment perhaps, or encouraging more people into work, or perhaps lower taxes. Rachel Reeves, Labour’s Shadow Chancellor, blithely talks about sorting out public services through economic growth – even applying the first-person to the process, as if growth was the gift one individual, and not the collective result of many millions of decisions. International comparisons seem to show that Britain’s productivity lags against peers. All that we need to do is fix this, the argument goes, and we will unlock growth. Well it may be that a burst of catch-up growth that is obtainable – but I suspect that these comparisons reflect an irreversible de-industrialisation, when a swathe of high-productivity industries left the country in the 1980s and 1990s and will not return. But stepping back, most or all of the developed world faces a number of headwinds that reduce growth potential, and in some case send it into reverse:

Demographics: more people are retiring as lower birth rates take their toll. Immigration can make up some of the difference, but is politically fraught, and stresses housing resources.
Trade: as globalisation runs into reverse, gains from trade are turned into losses. The UK is spared the American obsession with “near-shoring” or the reversal of the off-shoring of industries – but we have our own demons unleashed by Brexit.
Overdevelopment. The increasing consumption of goods, a critical driver of past growth, is simply a phase in economic evolution that has clearly ended. People move on to improve their quality of life in other ways. Meanwhile massive increases to the productivity of manufacturing industry mean that its impact on the total economy is much reduced. All this means that lower productivity parts of the economy, including many public services, loom larger. Productivity gains are harder to get, and where they happen the result is not so much increased production, but a transfer of resources to low-productivity sectors.
The energy transition. The country needs to make big investments to sources and distribution of energy, and its more efficient consumption. While the end result is desirable, in the meantime this will push down consumption. This, in fact, applies to pretty much all forms of investment. The country has become used to high consumption and low savings – reversing this won’t necessarily reduce growth as it usually measured, but to many people it will feel that way.
Housing. One way of achieving growth, or at least burst of catching up, is to allow people to move to places where the most productive jobs are. But these areas lack enough housing to accommodate this. Britain’s house builders have growth rich on the skilful management of land portfolios, rather than the actual building of houses, which many are actually very bad at. They have no incentive to increase the pace of building. And if the pace is increased, skill shortages quickly become evident. And I haven’t even mentioned slow and restrictive planning processes. Politicians at least show some awareness of this issue, but action never matches the promises.

The days of steady economic growth over the medium to long term are over, whether we like it or not. The best we can hope for is a short-term spurt. There is plenty of potential for human wellbeing to improve, but this will manifest itself in other ways.

The central problem is the funding of public services and maintenance of social safety-nets. A combination of two things are required here. The first is higher levels of taxation – and mainstream taxes which directly affect demand, and not gimmicks around capital and wealth (the latter may help make debt more manageable, but won’t suppress demand and prevent inflation). The second is a radical reform of public services so that demand for them is reduced – reducing the level of social problems, so that we require fewer police, courts, hospital beds, etc – and managing those problems so that they are solved early rather than passed from agency to agency. Alas we have very little idea how to bring such a change about – though we can see that some countries do this better than us (Japan, Switzerland, Denmark perhaps). A radical reform of government is clearly a part of this, with less centralised control – but it needs much more than this: decentralisation by itself could actually make things worse. With the possible exception of education (which has become more effective rather than cheaper) the reform efforts made by our governments in the last twenty years have taken us in the wrong direction – from Labour’s over-centralisation, to the de-skilling and outsourcing of the Conservative and coalition years. Unfortunately the choice between the two approaches of higher taxes or radical reform is not a binary one. Reform will require substantial investment, and that is likely to mean higher taxes in the short term at least.

If our politicians are in denial about all of this, how about the public? They surely understand that public services are in a dire state – and that fixing this will not come cheap. But they are too wrapped up in their own personal struggles to spend any energy on demands for change. Politicians are in denial for a reason: they don’t just a lack imagination and perception, but they also know a voter-loser when they see it. Still, Labour are clearly presenting a more realistic prospectus than the Conservatives, even if it is based on wishful thinking. Their poll lead at least seems to show some wider awareness by the public at large. And we must grasp at that straw.

The Liberal Democrats prepare for the next election

Bournemouth – site of the 2023 Lib Dem Autumn Conference

I haven’t posted for a month. I’ve been on holiday, and then last weekend I went to the Liberal Democrats conference in Bournemouth. This is the first in-person Autumn conference the party has had this parliament, since September 2019 in fact – and my first conference of any kind since then. It was lovely to catch up with friends and acquaintances, people-watch and sample some of the internal debates the party is having. But what did the event say about the health of the party?

Overall the party was in good heart after a series of spectacular by election wins and good local election results. This was widely expected to be the last Autumn conference before the next general election (a shorter Spring conference in March in York should go ahead) – which is expected next year in May or in September or October. It showed. Much passion was on display on the conference floor, and many excellent speeches – but little actual debate: few speaker’s cards were placed against motions or even amendments. It resembled the managed affairs of the Labour and Conservative parties. There was one notable exception, on housing, which I will come to.

The party leadership’s electoral strategy is clear: it is to increase the party’s representation in parliament to thirty or more seats (it is now 11 plus four by-election wins), almost entirely by winning seats currently held by the Conservatives (one or two SNP seats are in the sights, and perhaps the odd Labour one). The unspoken hope is that this will be enough to overtake the SNP as the third party in parliament, with a substantial increase in the party’s ability to influence the agenda there. It may also be enough to hold the balance of power, should Labour fail to secure a majority, and thus influence government policy in one way or another.

The contrast with 2019 could hardly be greater. The party then had momentum as a rallying point for those hoping to reverse the result of the Brexit referendum – and it talked of forming the largest party in parliament with its leader as prime minister. A lot of political capital was spent on the proposition that the party would not rerun the referendum if it won an overall majority. But the party was out-manoeuvred by Labour’s support for a second referendum (much good that it did them) and the bubble was burst in the December 2019. Following this debacle the party commissioned a post-election review by Baroness Thornhill, who, as mayor of Watford, was one of the party’s most successful politicians. Unlike most such reviews, which are generally discarded by the party managers before the next election arrives, this review has been taken to heart. Ambition has been lowered; the communications agenda is led by public opinion rather than activists’ priorities; efforts have been made to professionalise the party’s core workers and reduce staff turnover.

This gives a great deal of credibility to the party’s strategy. Early in the conference many activists were a bit glum after seeing a presentation by psephologist John Curtice that showed that the collapse in support for the Conservatives was benefiting Labour and not the Lib Dems. But what matters is what is happening in about fifty seats out of the 650, and national polls will not show this clearly. Another pollster, Rob Ford, showed that the party was doing well among better-off graduate voters, and that the numbers of these voters was increasing in the seats likely to be Lib Dem targets. The Tories’ courting of “petty bourgeois” voters by ditching green policies, and ratcheting up nasty rhetoric on immigrants, plays into Lib Dem hands here. In 2019, the Tory leader Boris Johnson was careful to nod to these voters; the current leadership knows no such subtlety. The Lib Dems should benefit from the collateral damage of the Labour-Tory contest for the petty bourgeois – rather as the Tories benefited from the collateral damage of the Labour-Lib Dem battle for the professional classes in 2019. The party’s prospects thus look good in a decent number of seats in the South-East commuter belt around London, and equivalent seats further north, such as Hazel Grove outside Manchester. The prospects are murkier in the party’s former heartlands in the west county, however, where the professional classes are much less in evidence – though with Labour relatively weak there, there must be some opportunities.

However this strategy is creating a lot of tension in the party. Listening to the electors and letting them set the agenda may be good for curbing arrogance and winning parliamentary seats, but party activists want something more ideological and radical. But the radicalism is being suppressed. The party will not explicitly campaign to rejoin the European Union, as many activists wish – a goodly proportion having joined the party in the first place because of support for EU membership. Rather like Labour, the leadership are sticking to a much vaguer line about better relations. A flirtation with Universal Basic Income (UBI) has been firmly squashed – though in general the party remains stronger on ideas for spending more public money that raising it or saving it. This conservatism led to the only serious, open conflict of the conference: on housing.

Housing developments are not generally popular in the rural and semi-rural areas that comprise the party’s best prospects. City-dwellers fume that this is “nimbyism”, but living in one such area (bordering decent Lib Dem prospect seats, though not actually in one) I can say that this is oversimplifying things bit. Many developments comprise mediocre-quality houses in environmentally sensitive areas, with inadequate plans for supporting infrastructure – because these are more profitable for developers. The Conservatives are in full retreat on their commitment to building more homes, and are attacking the Lib Dem national target of building over 300,000 houses a year (even if this commitment was in their 2019 manifesto too) – though this did not do the Tories any good in local elections here in Sussex. The Lib Dem leadership were worried enough about this to propose dropping this target in a new housing policy, while at the same time still committing to building roughly this number of homes, by increasing social housing, developing garden cities, and so on. But the Young Liberals organised a counter-attack. Younger voters feel as if they are the centre of a housing crisis, with increased rents and vanishing prospects of buying their own homes. The housing target has important symbolic value to them, and the policy looked like a retreat. The leadership tried to win by deploying heavyweight speakers, but their arguments were thin gruel. Former leader Tim Farron delivered a “barnstorming” speech in defence of the leadership position by shouting increasingly loudly that housing targets wee “Thatcherism” without explaining why. “Has he lost the plot?” my wife, next to me, asked. “Yes,” I said, and we both voted for the Young Liberal amendment, which was carried. That was the only act of defiance by the membership, however.

In the conference fringe, things were a lot more interesting. My especial interest was rural policy: how to turn around farming policy so that it helps restore wildlife and absorb carbon – without too much damage to productivity. For me this is a critical area: carbon policy will fail unless the land is made into an efficient carbon sink, and we end extractive farming practices – never mind ending the destruction of wildlife. I was encouraged by the party’s support for this, which is winning converts among many farmers. But hard choices beckon, as it is hard to see how this can work without a substantial reduction in the consumption of meat. I was also interested by the arguments made in favour of UBI at a couple of fringes. There is something deeply flawed in the conventional thinking about tax, benefits and public services – and UBI might be part of the solution. But if it is, it feels like only one leg of a three-legged stool and it will not work by itself. More on that on this blog later, as I gather my thoughts.

In his closing speech, the party leader, Ed Davey, harped on the familiar themes: outrage at water companies for dumping sewage into rivers and the sea, supporting Net Zero policies, and a new policy about health care and cancer treatment. What party activists were more interested in were his mentions of closer relations with Europe, advocacy of electoral and political reform and an attack on Labour for lacking ambition and caving in to Tory policies. He said about the minimum here, in comments that were not picked up by the media coverage. The attitude to Labour is interesting. There is no love lost between Labour and the Lib Dems. The two parties are battling against each other to win the Conservative held seat of Mid Bedfordshire in a by-election, in an interesting trial of strength. Activists were repeatedly called on the help there. The party needs Labour voters to come over to it in its key seats, and so is careful not to antagonise.

I think Ed is right in his overall approach. The next election will clear a lot of air, and hopefully the party can develop its more radical instincts afterwards. If Labour win, as seems likely, then the party will need to define itself clearly against it – and that will be a lot more interesting.

Anti-Tory pacts – lessons from Wealden

Analysis: Matthew Green thinkingliberal.co.uk

Such is the paradox of the information age. Massive amounts of information from across the globe is at our fingertips, and we can now use AI tools to retrieve it with startling efficiency. But news reporting, especially local news reporting, has collapsed – so many, many interesting things are liable to escape our attention because they will never get into to the accessible database. There has been a wealth of reporting on last week’s local election results in England. But many interesting, and important, local stories remain unremarked. Such is the case in my local area, with the district council elections of Wealden in East Sussex – and arbitrary bureaucratic agglomeration of villages and small towns, whose main centres are Uckfield, Hailsham and Crowborough, each of roughly equal size.

The first point to make about this is that I wasn’t involved in these elections, in spite of being a party member. I haven’t talked to any of the actors since long before the campaign started. My reporting is based simply on the results published by the council. I hope to find out more later – but I’m not minded to harass exhausted newly-elected councillors who have important decisions to make about running the council. I’m a blogger, not a journalist.

It was the first British public election since 1979 in which I did not vote for the Liberal Democrats, or one its predecessor parties. That was because they did not field a candidate in my ward. There were only three candidates: a Conservative, a Green and an independent who did not put up much of a visible campaign. I voted for the Green candidate, Christina Coleman, who won with 64% of the vote against the Conservative incumbent councillor, Roy Galley, who had won in 2019 with 59% of the vote, against just a Green candidate. Ms Coleman increased the Green vote from 523 to 1,107, while Mr Galley’s vote sunk to 545 from 749. As I searched through the results, I found that this outcome was not untypical. The Conservatives contested wards opposed by typically only one other party. And they lost badly, sinking from 34 councillors (out of 45) to just 9, behind both the Lib Dems (13) and Greens (11). This was a shocking result in a part of the Blue Wall that is so blue that most people don’t regard it as politically competitive. This bespeaks serious trouble for the Conservatives. It is hard to exaggerate the degree of disgust with the party amongst most of my neighbours, whom I would describe mostly liberal conservatives. One Conservative inclined neighbour is even more unforgiving of the Liz Truss episode than I am.

But that is unremarkable. It has been picked up by the main media commentary. What is remarkable was the degree of cooperation amongst the Conservatives’ opponents, and how well this worked. To put a bit of substance behind this story I have analysed the detailed results in the table above. This is all my own work and it’s possible the odd error has crept in. First, some basics to help understand the figures. There are 41 wards, four of which elected two councillors, and the rest just one. One was uncontested – the Conservatives were elected unopposed. The Conservatives contested all the wards except one (where an independent stood, and lost, against a Green). In the analysis I have tried to exclude candidates without serious backing or a campaign. I judged these to be independents who did not manage to gain 100 votes, and minor parties (though in one ward there was a Reform UK candidate, and in a another a pair of Ukippers, all of whom received over 100 votes); I have left in all of the Labour candidates, although one failed to reach 100.

The Lib Dems put up 23 candidates, doubtless so that they could claim that they could theoretically win a majority on their own. But they were opposed by the Greens in only three cases, and Labour in one, with “serious” independents in four. Eleven of the Lib Dem candidates faced no other serious opponent than the Conservatives; they were all elected – but only two others were. The Greens put up only 14 candidates – nine of these faced only one serious opponent (well, 10 if you exclude a weakly supported Labour candidate) – all (ten) of these were elected, along with one other. Three Labour candidates out of 11 were given a clear run against Conservative candidates; none were elected. Two Labour candidates were elected in three-cornered battles with Conservatives and independents (including a split result in a two member ward) – their first councillors in the district. The independents are by their nature not a coherent party, so the analysis means less – but their 18 serious candidates were involved in only four straight fights – three against the Conservatives (which they all won) and the lost fight with a Green. There were 13 three or four cornered contests: the Conservatives won six of their councillors here. These six, the two straight fights with Labour and the one uncontested ward were all the councillors they won. They won no contest in a straight fight with Lib Dems, Green or Independents. In two case of the more complex contests, the Conservatives prevailed with under 40% of the vote. In only three cases Greens and Lib Dems ran candidates against each other – the Conservatives won in two of them (with under half the vote), with the Greens winning the third comfortably with the worst Lib Dem performance of the day.

So far as I know there were no formal pacts – if there had been, the picture would have been a bit tidier. But cooperation is evident, and, as a device for winning against Conservatives, it proved highly effective – but less effective where Labour were putting up the candidate. How far can we extend the conclusions to a general election? Local and national elections are different – but the main problem for the Tories in Wealden was their unpopularity at national level. Their Wealden administration is not particularly unpopular, though no especially popular either. This suggests to me that an electoral pact between the Greens and the Lib Dems could turn some seats in the Blue Wall unless the government can seriously scare voters about the prospect of a Labour-led government. Wealden borough closely corresponds to a parliamentary seat, also called Wealden, which is very safely for the Conservatives (the Lib Dems edging ahead of Labour into a distant second) – but this all changes when new parliamentary boundaries come in. Such a pact would follow one made in 2019, but could be much more effective if voters are less scared of Sir Keir Starmer as Labour leader than Jeremy Corbyn.

But it would be very hard to bring Labour into such a pact. Many former Conservative voters will vote for the Lib Dems or Greens (somewhat ironically since the Greens are closer to Corbyn’s Labour than Starmer’s), but draw the line at voting Labour. So there is much less in such a deal for Labour than the other parties, and it would be a major distraction from Labour’s main campaigning focus. Also Sir Keir is setting his face against electoral reform (which would be another distraction for him), which reduces the attraction of Labour to Lib Dems and Greens.

In the right circumstances electoral pacts work. Given the severe distortions imposed by the current electoral system I would have no qualms about my party entering into such a pact.

Will pragmatism bring success to the Liberal Democrats?

Conservative party members showed little self-awareness this summer. Under their party’s rules they had the final say on who was to be their party leader, and, as they never tired of telling us, the next prime minister. The rest of the country was appalled that such a small, self-selected body of people was playing such a pivotal role in the country’s constitution. The leadership candidates then vied for members’ support by offering ever more crackpot ideas to appeal to their prejudices. And when the winner, Liz Truss, took over as prime minister, she treated her promises made to this small body of people as more important than the manifesto on which her parliamentary majority was based in December 2019. But amid all this self-indulgence another British political party has been rowing hard in the opposite direction by trying to make itself more relevant to the public at large. It is time to talk of the Liberal Democrats.

This follows the party’s own moment of self-indulgence in 2019. It’s then newly selected leader, Jo Swinson, decided to make the party’s raison d’être to act as a rallying point for the overturning of the 2016 referendum on Brexit. This was very popular with party members, encouraging Jo to take ever more radical positions on the subject. The party’s poll ratings climbed; it outpolled the other established political parties in elections to the European Parliament (but not, significantly, Nigel Farage’s Brexit Party). It attracted defectors from both Conservative and Labour parties. At the 2019 election Jo delighted party members by suggesting that the party would win the election outright. But in the grim reality of a general election campaign, as voters confronted the awkward choices before them, this self-indulgence stuck in their throats. The party offered no reconciliation to the half of the country still determined to complete Brexit, and simply promised to keep stoking up a debate that was tearing the country apart. The party’s poll ratings sank, resources were deployed on an electoral strategy that was far too optimistic, and the end result was a dismal 11 MPs, a net loss of one on the poor 2017 result. Losses included Jo Swinson’s own seat in Scotland.

This disaster prompted much soul-searching. One of the party’s most successful politicians, Dorothy Thornhill (serially directly-elected mayor of Watford), was asked to head a review of the party. Disclosure: I am secretary of the party’s audit and scrutiny committee which sponsored this review, and which continues to monitor the party’s response to it – but the views expressed here are very much my personal ones. The review was unsparing int its criticism of many aspects of the party’s management. It’s leading recommendation was as follows:

Based on the lives of ordinary people in the country today, create an inspiring, over-arching and compelling vision which can guide the entire Liberal Democrats organisation for the duration of a parliament, ideally longer.

The party, under its new leader, Ed Davey, has taken this recommendation seriously, and especially that first phrase. Whether the party’s current vision is yet inspiring, over-arching and compelling is open to question. But that it is grounded on the lives of “ordinary” people is not in doubt. The policies that are promoted to the public reflect the concerns of general voters, and not those of activists: the energy crisis, the outflow of raw sewage in rivers and beaches, and many more specific, local concerns. To this Ed has now added the rising cost of mortgages, and the difficulty of seeing a doctor. It is, unfortunately, hard to meld such everyday concerns into something inspiring, over-arching and compelling, but the party is trying. This causes no little frustration to many of the party’s activists and members. They are dying to make a big fuss over the failures of Brexit, for example, and push radical proposals for political reform. But generally voters don’t want to reopen the wounds of Brexit, and have yet to translate their frustration with the political system into demands for reform. A further example of the party’s sensitivity to “ordinary” people was the cancellation of the party’s autumn conference, which had been scheduled for just before the Queen’s funeral. This infuriated many activists, who had booked hotel accommodation and were looking forward to the first in-person conference since covid-19. But it would not have been a good look to the public at large. The counter offered to this by some activists, that the public wouldn’t notice, was hardly an encouraging one.

This was the only party conference to be lost to the Queen’s death. Other parties, large and small, benefited from the traditional extra publicity that arises from such events (though in the case of the Conservatives “benefit” is a stretch). Last weekend the party attempted to make up for this with a set-piece leaders’ speech from Ed – which was dutifully covered by the BBC and the more respectable newspapers. The coverage mainly focused on his proposal of a fund to assist stretched families to manage higher mortgage costs. I didn’t find the speech especially uplifting, but that may be because I am on old cynic, and I was watching it on a Monday morning. But it was coherent and competent. Ed clearly focused the party’s political strategy on winning parliamentary seats from the Conservatives, implicitly part of a coalition to end their time in power. Ed only mentioned other political parties in the context of local elections – where he made an attack on the SNP, but he resisted the temptation to attack Labour. He did make time to advocate proportional representation, but that was the only political reform that got a look in. It did not beat raw sewage in its prominence. Since the Labour leadership isn’t even going that far with political reform, we’ll have to accept that.

Is the party’s new approach working? Membership has plummeted since the heady days of 2019 and the party’s prominence in the Brexit debate. Reduced means stretches the party’s infrastructure, both paid staff and volunteers. But the party is winning elections again, including three spectacular gains in parliamentary elections. It is slowly rebuilding a local government base – but it is very patchy. The party consistently polls around the 10% mark – better than it has been, but short of the party’s heyday in the years 1997 to 2010. This too was a time when local electoral pragmatism trumped ideological vision – only for the party to collapse once it tried to use its electoral mandate by joining a coalition government.

Political vision is a tricky thing, especially in a political system such as Britain’s. Too much and the electoral coalitions needed for success fragment; too little and the party loses its way at the grassroots, which is central to party’s electoral successes. Under Ed Davy the Liberal Democrats are attempting a balancing act. The party is basing its campaigns mainly on issues that resonate with voters, especially those in Conservative-held areas; at the same time it is trying to manage expectations about what it might do after the election (i.e. potentially support a Labour-led government). Meanwhile the party still holds to its core beliefs, on openness, on the environment, and on the need for political reform. This is a balancing act traditionally managed best by the Conservatives – until now.

The next election is Starmer’s to lose

Chris McAndrew, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons

It looks certain that Liz Truss will become British prime minister this week, and British politics will take a dramatic turn. It is surely an act of political suicide by her Conservative Party.

We are, of course, urged not to underestimate Ms Truss – as so many of us have in the past. And yet, Matthew Parris in The Times tells us that this is a mistaken sentiment – just as it was for Boris Johnson and for Donald Trump – also politicians who won the top job against huge scepticism of their fitness for the job. She really is as shallow and dangerous as she looks.

I agree. During her bid to persuade first Tory MPs and then ordinary Tory members to vote her into the job, she has backed herself into a difficult corner. Her fiscal policies are inflationary; her economic ideas delusional, and she has shown little aptitude for the negotiation and compromise that are essential to any successful political leadership. She is also a stiff and awkward communicator. She enters the job in the middle of an economic crisis – it is hard to see that she has much chance of a honeymoon period longer than a month.

It gets worse for the Conservatives. They have built their political appeal on the basis of being a safe pair of hands with the economy. Whether this claim has been justified is another matter: while the austerity policies with which the party was associated from 2010 until 2019 struck most voters as being careful and sensible, most economists regarded them as being inappropriate at best. Now that reputation for economic competence is under water. Recent polling shows a Labour lead on handling of the economy, as its does in overall voting intentions. This is very dangerous territory for the Conservatives – and Ms Truss is going to do nothing to improve it. The sort of tax-cutting fantasies that are popular on the American right do not play so well with floating voters here. And it is hard to see that inflation is going to improve much under her stewardship – not without a recession, which she is claiming that she can avoid.

Still, many observers think the Conservatives can pull things back. Ms Truss will hit the ground running, as she has had plenty of time to prepare. A new cabinet will be put in place quickly – and the current government lethargy will be replaced by energy and optimistic talk. There is bound to be a honeymoon bounce. Ms Truss might even go straight into a new general election. This would be perfectly justifiable, to give her a fresh mandate, rather than the flawed manifesto of 2019. The Conservatives have been planning for this possibility for some time, as new, and more advantageous constituency boundaries come into effect. They will likely be better prepared than they opponents. But the polling looks dire – and she and all her hangers-on will be dismayed at the idea of throwing away their coup so soon. Opposition is a dismal place to be for those used to government. Still there is a certain recklessness about Ms Truss, and I wouldn’t rule it out.

The main reason that people seem to think that the Conservatives might win the next election is a lack of belief in Sir Keir Starmer, the Labour leader. He is uncharismatic and cautious. It is hard to say what he stands for, and his polling is weak. But is this a Westminster bubble thing? Activists on the left like their leaders to be charismatic and radical – and so do the journalists and others who follow them. It is easy to see their disappointment. But FT columnist Janan Ganesh warns that this bias against the uncharismatic, also applicable to US President Joe Biden, leads us to underestimate them. Floating voters like their leaders to be reassuring and middle of the road – and, I would add, especially if those leaders are from the left. Radicalism is not a positive attribute. The Conservatives are walking into a trap.

The main equation for Labour is whether they will win the next election by themselves, or alongside the Liberal Democrats. The Lib Dem leader, Sir Ed Davey, is no more charismatic than Sir Keir, though he is more experienced. He has made a lot of the political running in the last few weeks on the energy crisis – a subject he knows well as a former Energy Secretary. Like Sir Keir, he is relentlessly un-ideoligical. He is not trying to move the debate to the areas that his activists want to talk about – such as Brexit – but focuses on the areas that are close to floating voters top concerns. The other issue that the Lib Dems have been able to run with is the water companies’ disposal of raw sewage into rivers and the seaside. The Lib Dems are doing well in many Tory heartland seats where Labour is weak. The public ground is being subtly prepared for a coalition – or cooperation at least – between the two parties – in a way that it wasn’t before the Lib Dem coalition with the Conservatives in 2010, which saw Lib Dem support collapse.

It is reported that the Conservatives are preparing a campaign based on defeating the “Coalition of Chaos”, compared with strong and stable one-party government. This follows the successful deployment of this line of attack in 2015, which nearly wiped out the Lib Dems – though it failed in 2017, to the extent that the Tories are likely to avoid the slogan “Strong and Stable”, the basis of the 2017 flop. This line might gain traction if it looks as if a Labour-Lib Dem alliance will not gain enough seats to prevent the Scottish Nationalist Party from holding the balance of power. The SNP will not want to let in a Conservative government, but they will demand another referendum on independence. Labour and the Lib Dems are going to need to think through their strategy on that front with care, and not just hope that the issue won’t come up. But will the prospect of another Scottish referendum scare English floating voters? Probably not enough.

Sir Keir’s strategy was a risky one. He has done nothing to motivate his own activists – and gone out his way to insult the socialist left, the source of Labour’s most energetic supporters. He is unable to project the flair of Tony Blair, who previously made a floating-voter strategy work for Labour. But the Conservatives are playing into his hands.

I am going to be offline for two or three weeks.

An economic storm is coming – could this favour the Lib Dems?

Image: Whoisjohngalt, CC BY-SA 4.0 https://creativecommons.org/licenses/by-sa/4.0, via Wikimedia Commons

A bull market ends when the last bear has been beaten into submission. It felt that way last autumn. In 2020 I was astonished when, after an initial fall in response to the emerging covid crisis, financial markets bounced back and then became positively buoyant. How was this a rational response to the the catastrophe enveloping the world? But the bull market just went on.

Then last autumn I started to read articles suggesting that investors must fundamentally re-evaluate asset prices upwards. The argument was based on the idea that interest rates were fundamentally lower than historically, so we shouldn’t be using historical comparisons of yield and other such ratios, which were pointing to over-valuation. This felt a lot like the last bear caving in. There was certainly something crazy about financial markets at the time – shown not least by the craze for crypto-currencies. All this was reminiscent of the insane world of the tech bubble at the end of the 1990s. Loss is the new profit, and so on.

There is something very odd about the way the interest rate argument is used to justify high valuations. The logic is superficially soound. Anybody with a training in finance is familiar with valuation models based on a discount rate – which is the rate you should receive by investing your money in a zero-risk alternative. The lower the discount rate, the higher the valuation. But lower interest rates also suggest low rates of return on investing your money. So how is that investors get richer when returns fall? Common sense would suggest that a world in which the risk-free rate of return on investment is near zero (or negative after inflation) is one that is going to hell in a handcart. Something, somewhere is not making sense. In fact we should be expecting profits and rental incomes to stagnate or fall, and this should undermine valuations.

But asset prices are not set by the use of logically rigorous financial models. They are set by the laws of supply and demand. The modern economy is generating a lot of funds for investment, but there is an unwillingness for investors to use this for good old-fashioned projects that might generate a cash surplus at a future date. That leaves too much money sloshing around in bank accounts or low risk assets such as government bonds. That keeps low-risk returns down, and it also means that banks are willing to loan money at low rates of return. This generates demand for assets that might generate a return at expense of risk (though still not those boring real-economy projects, apparently). This does not necessarily lead to an asset-price bubble: investors could just be more patient. But it clearly has.

Central banks can do something to restore order by pushing commercial banks to raise interest rates, in their role as their regulator and the banker’s banker. For the last three decades they have chosen not to, using various arguments either to deny that there is a bubble, or to say that it isn’t their job to act against it – instead focusing on consumer price inflation and unemployment. It is difficult theoretical terrain, but it is hard not to see politics and the vested interests of the finance industry behind this.

What bursts bubbles? It is when the funds dry up and more people want to sell riskier assets than buy them, while demand often exceeds supply of less risky assets, causing a scramble. This is usually the result of chickens coming home to roost – high risk investments carry a high risk, after all. The great financial crisis (GFC) of 2007-09 was started by defaults in the US property market. It doesn’t help that in the modern world “funds” is a fluid thing and not the movement of fixed quantities of money as we might intuitively expect. This gives scope for chain reactions that can be global in reach. In the GFC this was truly spectacular and served to expand a minor crisis in US sub-prime real estate into a global banking catastrophe. That was the result of uncontrolled financial engineering across developed economies in the previous decade. There was something of a Ponzi scheme collapsing – but to this day supporters of Britain’s Labour government, which was an active supporter of the country’s role in building the Ponzi scheme (aka world-class financial innovation), insist it was nothing to do with them because it was all about US real estate.

The asset price bubble is clearly bursting now. The proximate cause is inflation, causde by widespread disruption to the supply side of the economy – which I discussed last week. Amongst other effects this is causing central banks to radically change course. Interest rates are starting to go up – though not by very much so far, given the levels of inflation. Perhaps more immediately threatening to markets is that Quantitive Easing (the central banks buying up bonds to keep long term interest rates low) is now moving into reverse. This upsets the balance of supply and demand in asset markets. Meanwhile the convergence of disasters affecting economic supply, from the war in Ukraine to covid in China, are clearly destined to make the world poorer, and this affects how people value assets.

The burning question is just how big will this financial crisis get, and what will its consequences be? I will focus on the UK – as we may find that things unfold quite differently in different countries. On the one hand the financial system is not as dangerously wound up on itself as it was during the GFC, limiting the chain reaction. The world banking system does not look in imminent danger. On the other hand, the outbreak of inflation knocks away one of the props upon which the financial system has been based for 30 years or so – the prospect of ever-lower nominal interest rates. This suggests that the crisis will be slower but longer-lasting. The most sensitive part of this is house prices. In the GFC prices dived rapidly as the financial system froze over and it became very hard to arrange mortgage finance. But conditions quickly eased, and prices bounded back. This time it looks as if nominal interest rates will rise steadily and may well stay up. This will impact new mortgages rather than existing ones, as most mortgages these days are fixed rate. So prices are likely to decline more slowly, but the effect could last longer. It is hard to tell about the wider economy. It depends n the state of business finances. If a harsher financial environment causes widespread bankruptcies, we could experience a significant recession. Otherwise things will be much slower moving and the economy will experience a long period of doldrums.

What will the political impact of these be? The accepted story of politics since the GFC is that the crisis provoked a backlash against metropolitan elites, which were seen as having caused the crisis and escaped its worst impact. It was the political right which managed to exploit this the best, with the rise of populist policies. In Britain this focused on Brexit. The Conservatives were the ultimate beneficiaries. Politically the old liberal elites have taken a pounding, though, and they are not such an obvious target for a backlash. An obvious culprit for the trouble is Brexit but the main opposition parties, Labour and the Lib Dems, are reluctant to invoke the B-word. Their sense is that Britons (especially the English) are reluctant to re-enter the polarisation and political warfare set off by the referendum in 2016. They were accused of trying to overturn a democratically fair decision, and many politicians in these parties have taken this message on board. Anyway, both parties want to win back voters who supported Brexit, as well as those who do not want to reopen the wounds.

But as yet I do not see a clear alternative line of attack. What should the government be doing to face the crisis that it is not? It is not obvious to the public whether the answer is more or less austerity. Swing voters tend not to been drawing non-pension benefits, which look inadequate. As yet there does not seem to be a tide of anger about the failure of the state pension to keep up with inflation. Immigration has failed to present as a burning concern to most. The opposition has to content itself with complaining that the government is incompetent and out of touch. But the public has to be convinced that they would do a better job.

But the point is that public anger is likely to gather pace, and it will attach itself to something – but we don’t know what yet. Where will angry, property-owning former Tory supporters go? Labour has not been positioning themselves for these voters since the departure of Tony Blair in 2007; it may forgotten how to. This could yet be a propitious moment for Lib Dems, who are increasingly focusing on this demographic. They have been courting these voters in by elections and local elections, with some spectacular successes. It is early days. No clear national narrative is emerging from the party. But it is too early for that. They need to understand how resentment at failing house prices and a stagnant economy translates into specific demands. But for the first time in a long time, the period the party spent in coalition with the Conservatives in 2010-15 might be an asset. From the vantage point of 2022, with some selective memory, many Tory voters might remember this as a golden age.

Boris Johnson survives another disaster

Image Petr Kratochvil, CC0, via Wikimedia Commons

Boris Johnson, Britain’s Prime Minister, was nicknamed “the greased piglet” by his predecessor and Oxford contemporary David Cameron, for his ability to get out of tight situations. He has demonstrated those skills yet again after last week’s very poor local election results for the Conservatives. Instead the pressure is on his Labour counterpart, Sir Keir Starmer.

The Conservatives lost about 500 council seats across Britain, against the low base of when these seats were last fought in 2018, in the midst of the floundering of his predecessor, Theresa May. Many Tory MPs had supposedly been waiting for these results to decide whether they would ask for a vote of confidence. And yet Mr Johnson looks confident and there is little talk of unseating him. Those Tory MPs will put off their decision until the next event, such as the publication of Sue Gray’s report into lockdown shenanigans. But if these MPs were going to do the dirty, they would have done it long ago. There will always be a reason why today is not the day, and mr Johnson’s supporters are adept at providing them.

Mr Johnson’s confidence is not faked. The party’s disasters in London and Scotland were “priced in” in the popular expression. Not too many Tory MPs seats are at stake in these areas. Meanwhile in the “Red Wall” of former Labour seats taken by the Conservatives they fared better; there is no sign of an impending Tory collapse. The Conservatives also lost a lot of seats in their rural heartlands across southern England. But mostly they lost these to the Liberal Democrats, with some to the Greens, as well as a few to Labour. Mr Johnson seems a lot less worried about these than about the Red Wall. A general election is very different to these local elections, and mostly the parliamentary seats are held with very comfortable majorities. The party knows how to sow doubt into voters’ minds, enough to limit any Lib Dem rise to a small number of seats. Meanwhile his line of attack on Labour, as having been taken over by an evil alliance of out-of-touch metropolitan middle classes and urban lefties, remains intact. There is work to do, but the next election looks quite winnable for Mr Johnson, albeit with a reduced majority. All he has to do is communicate this to his wavering backbench MPS. They seem ready to be convinced.

Which is one reason why the pressure is on Sir Keir. His supporters claim that the results show Labour has turned the corner in the Red Wall. But pulling back a bit from the low point in 2019 is not good enough for Labour. The results show that these seats are still in play – and pose the question of what would happen to Labour in a full strength general election campaign. Sir Keir has devoted all his energy to slaying the ghost of his predecessor, Jeremy Corbyn. This seems to be largely successful: Tory taunts that Labour is in the grip of extremists looks off the mark. That was a huge negative for the party in 2019, when many voters were put off by Mr Corbyn’s leadership. But Mr Corbyn’s leadership came with positives too – he was able to invoke enthusiasm amongst his supporters, and he managed to reach parts of the electorate that others did not. This was most evident in 2017 but was surely still there in 2019. But Sir Keir has lost this, and he isn’t able to rustle up much enthusiasm amongst people in the political centre either – in the way that Tony Blair and Gordon Brown were able to. The local elections have done nothing to allay those doubts.

The second reason Sir Keir is under pressure is a police investigation into an alleged breach of lockdown rules in 2021 while campaigning in a by election. This follows a persistent campaign by a tabloid newspaper, in an attempt to deflect pressure from the Prime Minister’s apparent serial breaches in Downing Street. Because Sir Keir has pursued Mr Johnson so aggressively on this issue, he is accused of hypocrisy, in the time-honoured manner of British politics. The truth is that the lockdown rules were unclear, especially with regard to work meetings, and many people pushed the boundaries without being challenged. The police have also levied fines when they shouldn’t. Sir Keir’s lapse, if that is what it was, does not compare to the goings on in Downing Street under Mr Johnson’s supervision. But in order to keep the pressure up on Mr Johnson, Sir Keir has now said that he will resign if he is fined. Which puts the local police in a very difficult situation. It also puts Sir Keir’s leadership in limbo.

What of the Lib Dems? They had an excellent set of elections, and, alongside the two spectacular by election victories last year, they have fought their way back into political relevance. They only did well where they had local strength, and even then, struggled against Labour in places like London. But they have now built a platform from which they can substantially build on their parliamentary representation – provided the voters are not scared that they might let in a Labour government, as they were in 2019. Lib Dems were quite happy with Labour being led by Sir Keir, as he is unlikely to scare off their floating voters. All this is a vindication of the leadership of Sir Ed Davey, and especially his decision, criticised within the party, of not mentioning Brexit. The party has shown an ability to come back in Brexit-supporting parts of the country, such as Somerset. But will they be able to do enough to stop the Conservatives from gaining a majority?

Mr Johnson’s strengths in political survival and campaigning are not matched by skills in government. His avowed radicalism has dissipated into gesture politics. Meanwhile an economic storm is gathering pace. This would be a tricky challenge for any government, let alone the current hapless one. Can the greased piglet survive that too?

A vindication for Ed Davey and Keir Starmer

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the problems of the Liberal Democrats. They don’t stand for anything, they don’t stand for anybody, they can’t win and even if they could it would be utterly pointless.
Danny Finkelstein, The Times 22 June 2021

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

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

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

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

Liberal Democracy has a wonky wheel that, time and again when hard choices loom, wobbles them off the highway and into the ditch of localism, neighbourhood grumbles, government intervention and “whatever’s your gripe is ours too”
Beyond its orange bird, Lib-Demmery has a big yellow streak. Nick Clegg, Danny Alexander and David Laws took the leap into real politics in coalition. But their party seems to have disowned that brave compromise. Are they ready for adult politics again? If they can learn to show steel, to say no to someone, something, anything, then Sarah Green, the new MP for Chesham & Amersham, may approach the next election with a fighting chance. If not, this will be one more by-election we shout about, then forget.
Matthew Parris, The Times 19 June 2021

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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