The events of the last week are an almost textbook illustration of the point I made a couple of posts ago that “governments are constrained in ways that thinktanks aren’t, and even the most ardently ideological libertarian SpAD quickly finds that political reality is very different to the world of position papers and whiteboards”. If what has happened differs from the textbook it is because a normal government would take note of these constraints before going public with its policies. But this isn’t a normal government. Even its ferociously ideological but already bitterly divided Cabinet doesn’t get much of a say – it wasn’t consulted on the abolition of the 45p tax rate, for example – whilst the civil service and other institutions are ignored or derided as ‘the declinist Establishment’.
The result is that the operation of the constraints upon this government is being played out in public, adding reputational damage which in turn makes it even more constrained. The first, and probably administration-defining, instalment of it came with the market crash that followed the ‘mini-budget’, which I discussed in my previous post. Crucially and very much in line with my discussion, what it revealed to the world were exactly the reality-denying characteristics that make it a distinctively Brexit government. “Denial of what every investor can see to be true is a poor strategy for winning hearts and minds”, as the Wall Street Journal put it, whilst in the Financial Times the government was described as “mad, bad and dangerous”, composed of “zealots [convinced] that reality must adapt to their desires”.
As so often, law and policy commentator and blogger David Allen Green summed things up well by pointing out that what’s distinctive about this administration “is not that it has an ideology, but that it has nothing else. There is no engagement with the real world as it is, and no understanding that there is a real world outside with which to engage”. Meanwhile, another distinguished blogger, economist Simon Wren-Lewis, explained how this grows not coincidentally but directly from the evidence-denying, fantasy-based world Brexiters.
It’s only now becoming clear just how close the UK came to financial catastrophe last week, and that this was unquestionably as a direct result of a UK specific, ideological denial of reality rather than, as the government has dishonestly tried to claim, ‘global conditions’.
When reality bites back
Of course such criticism would be denounced by the government and its supporters as no more than would be expected of ‘the Establishment’, ‘declinists’ and ‘remoaners’. But here’s the rub: after a week of unequivocal insistence that there would be no backtracking on any of its provisions, an insistence defended by hapless ministers and roared on by many pro-Tory, pro-Brexit commentators (£), reality won out.
Announcing that fell to Kwasi Kwarteng, initially during a series of gritted-teeth media interviews on Monday morning, during which his studied Etonian arrogance was barely able to conceal that which is all his own. In these interviews, and his subsequent conference speech, he revealed the dropping of the 45p tax rate abolition measure on the grounds that it was proving a “distraction”, though this hardly suggested he understood exactly what the problem was and, in itself, only began to address that problem.
In the process, he was obliged to make positive references to the importance of the OBR, BoE and other institutions that had been sidelined or disparaged the week before, and which the libertarian Brexit cabal regard with such contempt. Very soon afterwards it seemed to be announced that publication of the full ‘medium-term fiscal plan’ would be brought forward from its scheduled date of 23 November, then that it wouldn’t and finally that indeed it would be, perhaps to later this month, and this time with an OBR assessment.
So that was three ‘U-turns’ in one fell swoop, or was it four or five? There’s an argument that criticism of governments for ‘U-turns’ is overdone, and that it’s actually a mark of maturity and good judgement to own up to and reverse poor decisions. We heard much of that from Tory MPs this week, including Brexiters who, strangely, always refused to countenance the idea that the poorest decision of them all, Brexit, could ever be re-considered. But in this case it’s not that we have a government that generally has sound judgement, but gets the odd decision wrong and has the character to admit it, it is that poor judgement is built into its very fabric by virtue of the Brexit-derived bunker ideology and arrogance I described last week. Nor was this a mid-stream blip: it was the government’s flagship policy and its first major act.
This also means that these U-turns don’t do much to fix its problems, beyond taking the immediate political heat off. It’s true that sterling recovered its value, but that doesn’t represent a vote of confidence in the government’s plans so much as expectation that it will have to continue to modify them. Nor does it prevent mortgage rates rising by more than would otherwise have been the case. What is especially important is that, although in the past rates have often been higher, the proportion of household incomes taken up by mortgage payments has shot up to the level of the late 1980s, just before the housing market crash.
It’s also true that the gilt markets rallied (i.e. prices rose and yields fell), but not to the levels they were before the mini-budget, so government borrowing will still be more expensive. So there is no sense in which the government’s reputation has improved or that it is now seen as trustworthy by the markets; the legacy of the mini-budget is a “credibility crisis” for the government (£) according to Sky News Economics Editor Ed Conway.
This won’t have been helped by Truss’s conference speech. Not that it was either a disaster or a triumph – it was quite dull, predictable in content, mundane in delivery – but because, like Kwarteng, she clearly doesn’t understand why the mini-budget got the market reaction it did and certainly doesn’t acknowledge any responsibility for it. That was shown in particular by her spiteful references to having to face down an ‘anti-growth coalition’ comprised of trade unionists, environmentalists, opposition parties, Brexit deniers, North Londoners, vested interests dressed up as thinktanks, liberal podcasters and so on.
At one level this was just entry-level populism, a recitation of enemies of the people, albeit an incoherent one in including almost no one who is actually ‘anti-growth’ whilst being so widely drawn as to include many traditional or potential Tory voters. At another level, it implied precisely the denial of reality which is the root cause of all her problems. For it wasn’t just that she depicted this coalition as the enemies of growth, but also as implacable opponents of her rejection of ‘the status quo’. By that, she meant precisely the supposedly revolutionary, anti-Establishment thinking of, well, the ‘vested interests dressed up as thinktanks’ that openly boast of owning her government.
But when this thinking was put into practice in the mini-budget it wasn’t these imagined enemies of growth who caused the markets to crash, it was cold-eyed traders who saw that it was completely unrealistic. The reason for that is entirely straightforward. The libertarian thinktanks she relies upon peddle theories, most obviously the Laffer Curve, which are untrue and have been repeatedly discredited. It’s that which she plainly doesn’t understand. It may be no coincidence that during her speech on Wednesday sterling and UK gilt prices both fell, and gilts continued to do so yesterday.
Can the fiscal plan be made convincing?
The events of the last week mean there is now no possibility that the government’s original plan of boosting growth through a combination of tax cuts and regulatory ‘reforms’, but without substantial immediate spending cuts, can survive, and it is spending cuts to which attention is now turning. But just as the mini-budget fiasco weakened the government’s market reputation, so too has it weakened even further than before its control of the parliamentary party.
Having seen the adamant insistence on the 45p rate crumble, literally overnight, Tory backbenchers are emboldened to oppose spending cuts, with the possibility of not upgrading welfare payments in line with inflation being the emergent battleground within a Tory Party now at total war with itself. It won’t be the only battle, because after years of spending cuts there is very little scope for new ones, and many Tory MPs are mindful that they were not elected on a manifesto of cuts and fear the electoral consequences. Truss has made what during the leadership campaign I called the ‘unleadable’ Tory Party even less leadable by her incompetence.
The same is going to be true of the deregulatory or ‘supply-side reforms’ in which the government places such faith to make its fiscal plan convincing, and which are central to its ideological dogma in their own right. We still don’t have much in the way of detail, but there is an expectation these reforms will include a more relaxed immigration policy, despite Home Secretary Suella Braverman’s almost psychotic insistence this week that net migration must and will fall. As her speech shows, if immigration is now allowed to rise this will open up the profound fissures within the Brexiter coalition, with Farage also already sounding a warning note.
It’s true that, under Boris Johnson, post-Brexit immigration controls were laxer than many leave voters will have expected or wanted – and for good economic reasons, which demonstrate one of the many fallacies of Brexit – but that happened very quietly. Truss seems set to relax them further, and much more publicly. Tory MPs who dislike that, or think their constituents will dislike it, will resist it, partly through fear of the revival of a Faragist Party. After all, it was the deep desire to see off Farage’s threat that drove Cameron to call the referendum in the first place. But if Truss now doesn’t make substantial relaxations to immigration policy then, as a supply-side reform supposed to promote growth, it won’t have any credibility, further damaging that of the fiscal plan.
Another major plank of supply-side reform is expected to be relaxation of planning laws and rules, perhaps generally or perhaps just in what are likely to be large numbers of new ‘Investment Zones’, as well as in the already announced Freeports. But that, too, is likely to be strongly resisted by many Tory MPs whose inboxes are already reported to be full of angry emails from constituents about it (£). One of the key reasons for the Tories losing the Chesham and Amersham byelection to the LibDems, just last year, was voters’ opposition to liberalising planning law, leading the then Housing Secretary Michael Gove to pause or abandon some of the changes, including those for what were then called ‘growth zones’.
So it is very likely that Truss will face strong opposition to her plans in this area, too, and it’s of note that it was Gove who spearheaded backbenchers’ public opposition to the ‘mini-budget’. There is already such opposition to the revival of plans for fracking, hence Jacob Rees-Mogg snuffling around for a way to get them through without too much scrutiny.
A farewell to EU retained law? Don’t bet on it
Much of this has nothing directly to do with Brexit (apart from the obvious fact that UK immigration control policies apply now to EU nationals), but another major part of the government’s supply-side agenda is to “review, replace or repeal” the entirety of retained EU Law by the end of 2023. In principle, it ought to be easier to get political support within the Tory Party for this, and repeating the pledge during his conference speech earned Kwarteng a cheer. But it’s highly likely that “repeal” was the word that excited them, and if the years since 2016 have shown anything, it is how much easier it is to get Brexiter cheers for slogans than it is to deliver what their content implies.
For despite what some imagine, and others fear, it is not going to be quick or easy to deliver on this promise even though the government is arrogating to itself enormous powers to act by ministerial decree, thus avoiding extensive parliamentary scrutiny. In practice, it’s likely that much of EU retained law will continue to be retained, either temporarily or permanently, rather than be allowed to expire under sunset clauses. That’s because, often, repealing without replacing would lead to immediate chaos, with cliff edges over which businesses will drop overnight. True, that might not deter this government, which may be too arrogant to consult in order to understand the consequences, or too reckless to care, and simply go ahead on the basis of its ideological convictions. Indeed, the mini-budget shows us exactly that possibility. But it also shows us how quickly the government can then be forced to backtrack.
Of course, there may be particular issues Truss selects to stand firm and fight on, and which these are will become clear in due course. But given the volume of law in question, and the timescale of making decisions by the end of 2023 that is anticipated, there aren’t likely to be many such cases. That’s partly because each one will encounter political opposition from both inside and outside the Tory Party. But there also issues of administrative bandwidth, especially when the government also wants to cut the civil service, and these apply not just to ‘repealing’ retained EU law but to ‘replacing’ it or, indeed, simply ‘reviewing’ it as a prelude to either of these.
Those elusive Brexit freedoms
There are already good examples* of how complex and time-consuming replacing EU regulations is, most obviously that of REACH, the EU’s chemicals regulation system, now effectively reproduced as REACH UK but with many features still subject to long transition periods. It is also expensive, and fundamentally pointless, certainly from a free-market, deregulatory perspective, since it creates a double regulatory system for those firms which operate in both the UK and the EU, increasing their costs, whilst also being protectionist in at least potentially discouraging non-UK firms from serving the UK market, reducing customer choice.
A not dissimilar example is the attempt to replace the EU’s CE conformity assessment marking regime with the UKCA mark, which has persistently been delayed and now appears to be in limbo. Again, the main criticism is that it simply creates a double regulatory system, disadvantaging UK firms and potentially UK customers. As to what is going to happen now, it’s not clear. As things stand, goods without the UKCA mark (or the UKNI mark, another complication, as I discussed last August) will not be legal on the Great Britain market from the end of this year. Since that deadline is less than four months away, it must be at least questionable whether it will be met.
The UKCA case is particularly instructive as it shows three related issues coming together. One is that the way it has been endlessly postponed shows the problem of lack of administrative bandwidth (and, for that matter, the capacity of businesses). Another is that only after it had already been set in train did Brexiters, in this case Jacob Rees-Mogg (£), actually realise what was obvious to anyone not obsessed with Brexit deregulation, namely how inefficient it would be. And, thirdly, perhaps due to a combination of these things, it shows how easily the Brexiters lose interest in things they used to be so excited about, like children who have begged for months for a new toy for Christmas, only to discard it as dull and disappointing on Boxing Day.
In fact, Brexit is already littered with half-finished projects, a current example being the delay in the planned switch-off of the CHIEF customs system on 1 October. Like discarded presents, they still cost money though, unlike such presents, they can’t really be discarded and have to be made to work, somehow, even if the Brexiters themselves have moved on to some shiny new attraction.
Why reforming Solvency II just got harder
One such attraction expected to feature prominently as part of the ‘supply side reforms’ looks set to be replacement of EU GDPR with a domestic data protection regime, which has long been in a Brexiter ambition. If so, the problems posed will inevitably be very similar to REACH UK and UKCA. A more interesting example is the replacement of the Solvency II directive, governing how much capital insurance companies must hold as reserves, to protect against insolvency, versus how much they can invest to gain a return for policyholders. Again, this has long been in the Brexiters’ sights and is a prime candidate for Truss’s growth agenda as, potentially, it would unlock really substantial amounts of investment funding.
As I discussed in a post in February this is another highly complex and technical area, but it is also one where the Brexiters actually have a reasonable case for reform (for that matter, the EU has also been considering similar reform). That’s partly because Solvency II is arguably over-cautious but also because, given the size of the UK insurance industry, it’s not absurd, as it is in most sectors, to envisage a UK-specific regulatory approach or even such an approach becoming one that other jurisdictions might follow.
Be that as it may, the fundamental dilemma is the balance of reward (unlocking investment funds) and risk (insolvency of insurance firms), and it is one which splits opinion in the financial community. And here the Truss government may pay a particular price for the damage of the mini-budget. On the one hand, the market instability it caused showed the potential fragility of even the largest pension funds, and possibly more to the point that of banks, and also led to several UK property-focussed investment funds restricting redemptions this week (i.e. limiting how much investors can withdraw), a more minor but not dissimilar reminder that solvency matters. Might that then tip the calculation of risk and reward against relaxing Solvency II regulations?
On the other hand, as I and many others have repeatedly stressed, the mini-budget revealed an evidence-averse, fantasy-based Brexit government. As such it has contempt for financial institutions and seems to treat all risks as something to be dismissed as ‘Project Fear’. So would such a government be trusted by financial actors to have undertaken a serious assessment of the balance of risks and rewards in the case of Solvency II? It’s a neat illustration of how the libertarians’ Brexit Britain can’t simultaneously embody a spirit of iconoclastic revolutionary ardour, at war with the global Establishment, yet also expect to be a trusted, stable pillar of the global order.
The general picture on post-Brexit deregulation
So, coming back to the more general point, the so-called Brexit Benefits Bill to sunset EU retained law, and in the process to deliver some of the supply-side reforms to make the fiscal plan credible, is not going to work in anything like the way that the government appears to imagine. Either there will be yet more chaos, with regulatory systems simply falling into disuse, unreplaced. Or there will be botched regulatory change because there wasn’t time to create functioning new systems. In either case, there will be further political damage to the government, not to mention the economic damage. Alternatively, there will be endless reviews in which it is decided to retain EU regulations or at least to postpone their replacement or their repeal. This will also cause political damage because it will infuriate those Brexiter MPs and commentators who have been complaining for months about what they saw as lack of progress under Johnson and which they expected Truss to rectify.
Throughout all this, the government’s claimed and defining objective of economic growth will be seriously undermined because regulatory uncertainty and/or chaos is a profound disincentive to business investment (£). As with the rush to ‘get Brexit done’, leading to the premature triggering of Article 50 and the refusal to extend the transition period, this latest rush to drop retained EU law is a recipe for incompetent delivery.
Ironically, were the Brexiters to slowly, calmly and pragmatically work through a prioritised list of realistic and worthwhile regulatory changes then they might have more success. But, then, if they had the facility to do that they probably wouldn’t have been Brexiters in the first place.
Northern Ireland: a glimmer of pragmatism
It’s possible that, apart from dropping the top-rate tax proposal, another way the reaction to the mini-budget has forced a change in the government’s thinking is by adding weight to the pre-existing case that it would be crazy to add a major row with the EU over the Northern Ireland Protocol to all its other woes. Whatever the reason, some movement in its position is suggested by the astonishing comments made by Steve Baker, the most hardline of Brexiters and now Minister of State for Northern Ireland, during the party conference and repeated in a subsequent interview in Irish media. In them, he offered an apology to the EU and to Ireland for some of the UK’s, and his own personal, conduct during the Brexit process, and expressed a desire for a harmonious agreement from the Protocol negotiations, in which the UK “needed to show humility”.
Subsequently, a spokesman for Truss confirmed that Baker “does speak for the government” (although in an interview, as well as saying that, she also said that Baker “speaks for himself”). That apparent ambivalence isn’t the only reason for caution. Baker also spoke of his support for the provisions in the Northern Ireland Protocol Bill which, if insisted upon, would preclude a negotiated solution, and other ministers, including Rees-Mogg, made much less conciliatory remarks during the conference.
Even so, there is generally a palpable sense of an improved mood, and Baker’s remarks were warmly welcomed by the Irish Taoiseach. It’s a sense compounded by the resumption of ‘technical talks’ about the Protocol yesterday, as well as by Truss’s participation in the inaugural meeting of the ‘European Political Community’. That is a positive and potentially important development in its own right, at least in implying a recognition that UK interests are bound up with those of the continent it is a part of, urgently as regards energy security, and perhaps a sliver of hope for the future after years of Brexiters revelling in the most grotesquely insulting behaviour (many examples other than that linked to could have been chosen).
It's certainly possible to read Baker’s comments not just as preparing the ground for a deal with the EU but as ‘pitch-rolling’ to acclimatise the ERG to such a deal being struck. If so, a key question will be how they react. Truss’s evident political weakness is an incentive for them to rebel, whilst the fanaticism of at least some of them means that even someone with Baker’s impeccable Brexiter credentials may simply be denounced as a turncoat. Unsurprisingly, Kate Hoey has already dismissed what he said (£), as of course has the DUP.
Predictions are difficult because, as has always been the case, the British government has no coherent, realistic or consistent position on the Protocol, ultimately because Brexiters have never faced up to the realities of what Brexit means for Northern Ireland. So it is always a matter of reading the runes to try to work out what its intentions are. It could be that all that is happening is preparation for the UK to announce that, despite all its efforts to be conciliatory, ‘the EU refused to cooperate’.
Still, it does seem more likely at the moment that the government is set to be more pragmatic than at any point since Johnson and Frost started agitating against the Protocol they themselves had negotiated and agreed. Whether that reflects a genuine change of heart or the pressure of other events is impossible to know. In the short-run that may not matter if a deal can be reached. In the long-run it does because, as happened with the Protocol itself, it is always possible that anything agreed now will later be disowned by the Brexiters as having been ‘forced upon them’.
The mixed blessings of having a hopeless government
Much that is in this post reflects a point I’ve made repeatedly over recent weeks, which is that the political constraints facing the Truss government in delivering an unpopular, unmandated agenda explicitly derived from libertarian thinktanks are formidable. Even Jacob Rees-Mogg, in his trademark faux-aristocratic drawl, as if he learned English by listening to language school records from the 1930s, recognised that this is so when he explained to disappointed Tory delegates that leaving the European Convention on Human Rights (ECHR) is not politically viable. Although, as with immigration policy, there is a contradiction because, at the same time, Suella Braverman is supposedly going to legislate so that no ‘European judge’ can intervene in UK deportation decisions. But such legislation would be meaningless for as long as the UK is an ECHR member.
Such contradictions abound because there is a constant tension between the extreme measures that many of the government would undoubtedly like to take and the constraints, whether of politics or practical deliverability, on adopting them. Indeed the increasingly erratic Rees-Mogg reportedly had his proposals for a “bonfire of employment rights”, including the Brexiter favourite of abolishing the 48-hour limit derived from the European Working Time directive, “quashed” by Truss for being “half-baked”. It’s quite something to think that even the Prime Minister isn’t quite as mad as the Business Secretary, although on other issues it seems that the polarity is reversed (£).
We should be grateful for small mercies and, of course, these political constraints don’t mean that this government will not do huge damage the longer its stays in office. There is much to be depressed and anxious about in having a government so woefully incompetent. It will leave a gargantuan mess to be cleared in the years that follow its departure.
Yet that might have some consequences that Brexiters don’t like. If, as some of them fear, the failure of this government will derail or discredit Brexit then its very incompetence may well contribute to their fear coming to pass. Truss has identified the ‘Brexit deniers’ – meaning, presumably, those who deny it was a good idea since no one can deny Brexit has happened – as amongst her opponents. So if by her actions she provides further evidence of its folly their numbers can only increase. Ironically, as well as being deeply depressing, the most hopeful thing about this government is how utterly hopeless at governing it is proving itself to be.
*For a wealth of detail on the progress or otherwise of UK divergence from EU regulations, see the UKICE tracker.
There will be no blog next week.
Friday, 7 October 2022
Friday, 30 September 2022
The week the wheels came off the Brexit Britain bus
The political ambitions of the libertarian wing of the Brexit Ultras have always been ambivalent. On the one hand, they have largely preferred to complain of betrayal from the sidelines rather than take any responsibility or, if accepting ministerial office, to quickly resign rather than engage with the pragmatic realities of Brexit. On the other hand, they have hankered to be in charge not just so as to create ‘true Brexit’, but the ‘real Conservatism’ of which Brexit was a part and to which it was a gateway.
With the advent of Truss’s premiership, they have eschewed the sidelines in favour of governing and, with a rapidity that even their sternest critics would have thought it cruel to predict, have been exposed as utterly incompetent, both politically and economically, and in the most basic of ways. It is deeply ironic that this has happened at the hand of ‘the markets’ which they so slavishly fetishize.
Anatomy of a crisis
The occasion, of course, was last Friday’s tax-cutting ‘mini-budget’. “At last! A true Tory Budget”, the Daily Mail drooled, whilst Nigel Farage simpered about “the best Conservative Budget since 1986”. Yet, whether despite or because of this fidelity to Conservatism, and as anticipated in my previous post, there was an immediate crisis in the currency and bond markets, with the value of the pound falling to its lowest ever level on Monday, and the cost of government borrowing in the form of gilts or bonds rising very sharply. Amongst numerous knock-on effects, pension funds, which invest heavily in such bonds, came within hours of mass insolvency on Wednesday afternoon, threatening a major breakdown of the financial system and requiring major emergency temporary action from the Bank of England. This, in combination, with a clear signal from the Bank that interest rates will rise in due course, which eased pressure on the pound, has effected a degree of stabilization, but markets remain jittery and it’s by no means clear that this crisis has run its course, especially as regards gilts.
These weren’t routine or trivial market movements, but an overwhelming and brutal vote of no confidence in the government’s plans. Specifically, they were a vote of no confidence in the decision to cut taxes, or not implement previously planned tax rises, and to fund this through borrowing. Again as anticipated in my last post, the government’s refusal to allow its plans to be scrutinised independently by the Office for Budget Responsibility added to market alarm. So, too, did Chancellor Kwasi Kwarteng’s casual reaction over the weekend, even suggesting further tax cuts to come. The rout continued on Monday when, as Paul Donovan, Chief Economist at UBS Global Wealth Management, put it, “investors seem to regard the UK Conservative Party as a doomsday cult”.
Throughout the week, the absence of public statements from Truss or Kwarteng compounded this impression, and when Truss did emerge on Thursday morning it was to re-confirm the government’s policy and downplay the market reaction, as well as denying it had anything much to do with the mini-budget. To the extent she admitted any connection it is the false one that markets didn’t like the costs of the energy bill support part of the budget, when in fact it was the tax cuts. It has since emerged that this and the equally false claim that what is happening in the markets is a global event due to the Ukraine War rather than something specifically affecting the UK are to be the government’s lines of defence.
Amongst the most significant events was when, on Tuesday, the International Monetary Fund (IMF) issued what BBC Economics Editor Faisal Islam described as a “stinging and unusual rebuke” to the UK. What made it so unusual was that such IMF warnings are usually made to emerging markets, not leading global economies. I mentioned in my previous post that aspects of the economic situation resemble those which occasioned the IMF’s 1976 bailout of the UK, and its statement this week that it is “closely monitoring” developments in the UK carried echoes of that. It was also, like the comments of other international players and the decisions taken by traders, a reminder that, no matter what Brexiter ‘sovereignty’ fantasists may think, the UK can never be ‘independent’ of the wider world within which it is a relatively small player. Most fundamentally, the Brexiters’ belief that they can create their own reality, and that all opposition can be swept aside as ‘Project Fear’ or ‘remainer sabotage’, was tested almost to the point of destruction.
These events have been widely reported and there’s no point in me adding more to that. Instead, I want to tease out more about the Brexit aspects and implications.
The Brexit mini-budget
At one level, the mini-budget had very little to do with Brexit in that, so far as I can see, the only provision within it that wouldn’t have been possible whilst a member of the EU is the planned removal of the cap on bankers’ bonuses. That isn’t unimportant, politically, but it’s not what spooked the markets. However, it is the budget of the Brexit Ultras and it is intimately bound up with Brexit. In case anyone doubts that, it was underlined by Farage’s endorsement. Even more explicitly (£), John Longworth, one of the most immoderate of the Ultras, regards it as part of Truss’s battle “for the future of Brexit Britain”. It’s a sentiment widely shared in Brexiter circles, with the Bruges Group tweeting that “remain media are talking up market panic … to derail Brexit”.
So, given that the Brexiters themselves regard the mini-budget as integral to Brexit, it’s reasonable to say, as Robert Shrimsley of the Financial Times did (£), that “Brexit ideology lies behind the UK’s market rout”. It’s abundantly clear to even the feeblest intelligence that those Brexiters now include Truss, for all the fury of Dominic Cummings’s denials (directed at me!) on the inane grounds that she supported remain in 2016. As I pointed out during the campaign, she is now a ‘born again Ultra’, perhaps the more fanatical for being so, and was extravagantly endorsed by the leading Ultras, making the fact that she was once a remainer the most tedious and least relevant thing to say about her.
As so often before, Brexiter responses to the crisis they created have been confused and contradictory. Some in the government prissily said they could not comment on market events, as if some new Trappist ordinance of political propriety has been invented. Others downplayed what has happened, suggesting that the market reaction is either trivial or transient, or even that it has little or nothing to do with the budget but is simply a result of a strengthening dollar (which doesn’t explain why the pound fell against all major currencies, or what happened in the bond market). Outrageously, some, like Crispin Odey, hedge fund manager, Tory and Vote Leave donor, and sometime employer of Kwarteng, blamed “remainers”. Peak insanity was reached by Daniel Hannan, who blamed the crash not on the mini-budget, but market fears of a Labour government!
In addition, or instead, some Brexiters blamed the Bank of England (BoE) for having failed to increase interest rates by enough, early enough, or to have reacted immediately to the crisis so as to support sterling and control inflation. That argument is more complicated than their others. There is a case that last week’s pre-budget interest rate rise should have been larger, although it’s not a straightforward one because doing so would also have been likely to impact on the cost-of-living crisis by pushing up mortgage rates.
Nevertheless, it was the government’s mini-budget, not the BoE, that caused this crisis and there is something bizarre about a government simultaneously taking inflationary measures it says will boost economic growth, whilst relying on the BoE to take measures to reduce inflation and choke off growth. Indeed, part of the reason for market nervousness is that the institutions of financial and economic governance are not acting in a consistent and coordinated way, something flagged up by Mark Carney, the former BoE Governor whose actions did much to preserve a degree of economic stability after the Brexit referendum vote. Perhaps the BoE could have acted earlier, though had it done so it's easy to predict that then it would have been accused of overreaction and of trying to undermine government policy. In any case, what is even more bizarre is the spectacle of Brexiters, with their disdain for experts, technocrats and unelected bureaucrats, positioning the BoE as having responsibility to save the government from itself. Or perhaps it is not bizarre, so much as a reflection of the Brexiters’ reflex refusal ever to take responsibility for anything even when in government.
Government by cultists
That refusal has as its counterpart the distinctively Brexity idea, now taken over wholesale by this Brexit government, that they are beleaguered revolutionaries of true Conservativism fighting the (presumably false) conservatism of ‘the Establishment’. The notion of Brexit as an anti-Establishment insurgency has been a ludicrous one ever since the 2016 referendum was won, and Brexit became adopted as the central policy and national strategy. It is even more so now that the Brexit Ultras are unequivocally in charge of government, though of course it is a standard populist trope, familiar from the Trump presidency.
What we have seen this week is that the Brexiters have added ‘the markets’ to the increasingly long and diverse list – encompassing the ‘Woke’ Blob, the civil service in general and the Treasury in particular, the BoE, remainers, rejoiners, the National Trust, the BBC – of enemy forces they must confront in the name of revolutionary purity.
Longworth explicitly included the City in this list, whilst unnamed government figures suggested that traders were enacting “a plot by the left” which will have come as a surprise to them. Similarly, the Daily Mail reported that senior Tories blame “City Boys” for “sparking economic chaos” with traders “trying to make money out of bad news”. Well colour me shocked. Haven’t these free-market ideologues worked out that ‘trying to make money’ is what traders always do, indeed it’s all that they do? Do they think that ‘City Boys’ care about making government policy look good? And aren’t these the same ‘City Boys’ who, according to Kwarteng, are the brightest and the best who must be encouraged to come to London by uncapped bonuses? Aren’t they, for that matter, good ol’ City Boys like Crispin Odey?
The IMF, which has long been on the Brexiters’ list of enemies, also came under attack for its comments. For example, Brexiter economist Andrew Lilico was outraged by its “left-wing” intervention, to the point that he advocated the UK should “withhold its IMF contributions”. It is a strange world in which the IMF is considered ‘left-wing’ (or even, as Brexit Party ex-MEP Lance Forman had it, “socialist” and under the influence of the EU), and the idea of withholding contributions seems to conjure up a vision where Brexit is the gateway to exiting any and every international institution, in a permanent revolution of endless Brexits.
Also triggered by the IMF, David Frost opined, contradictorily, that its comments were “somewhat eccentric” yet reflected its “highly conventional approach”. This is indicative of the fact that what is at stake is more than Brexiter whinging about the enemies that beset them. This government, and its semi-intellectual underlabourers in think tanks and the media, are convinced that they are the custodians of a new truth. The markets and their economists are “attached to the old way of doing things” as Patrick Minford put it, to the extent that “there is no sterling crisis except in the minds of idiots” (£). Similarly the BoE has “not got the memo” about the “economic consensus crumbling” according to Paul Marshall (£), investment manager and Vote Leave donor. Thus arch-Brexiter journalist Allister Heath insists (£) Liz Truss must “hold her nerve” and defy the “orthodoxy” of “the elites”.
Their problem is that, as the market reaction shows, the ‘old ways’ still hold and the ‘economic consensus’ remains. Calling it an “orthodoxy” is accurate, but that very accuracy shows why decisions to “defy” it are foolish. That’s why investors regard the Tory government as a ‘doomsday cult’, and responding that investors are ‘idiots’, ‘conventional’ or even ‘socialists’ makes no difference, except perhaps to re-enforce them in that view.
As I put it in my last blog, traders simply don’t care about the theories of Patrick Minford, or of the broader IEA-derived analysis of the cultist government. Indeed, one of the few semi-amusing features of Brexit is the spectacle of all these free-trade, free-market economists going into contortions to explain how erecting trade barriers doesn’t damage trade and, now, why markets don’t understand how to price currencies or debt. It’s this stupidity that accounts for the fact that, apparently, market traders talk of the demand for a “moron risk premium” in order to hold sterling assets and fund UK debt.
But is there a cunning plan?
However, there is a different interpretation of all this doing the rounds on social media*, in which, far from being utterly incompetent, the Brexit government has a skilful, if malevolent, plan. It is an interpretation which comes in two variants.
One version is that the government deliberately crashed the markets, secretly giving hedge fund traders and others – with whom the current government has strong links of networks and party funding – advance notice so that, as indeed happened, they could short the markets and make fortunes. It doesn’t really make sense, though, because no such secret information would need to be passed – it was obvious even to me, and widely predicted, what was going to happen if the mini-budget pursued the policies Truss had openly advocated during the leadership campaign. Indeed that’s why the pound was beginning to fall once it became clear she was almost certain to win.
It also doesn’t make sense given the huge political price of the crisis. Some suggest that the government is so fanatical that it does not care about winning elections, or already thinks the next election is lost, and will inflict any amount of damage in order to pave the way for disaster capitalists to swoop in. Even, some say, the government ministers devising this scenario are doing so in expectation of lucrative employment with hedge funds and the like. But I’ve never met or heard of a politician who having devoted years to a political career has so cavalier an interest in its continuing success, and it seems extremely improbable that it would characterise an entire government.
And if it really does, then why provide energy bill support, so plainly at odds with small state, libertarian ideology? Indeed that seemed to be Truss’s position early in the leadership contest, when she spoke against giving people “handouts”, only to change tack when it became clear what the political consequences would be. The same applies to the theory of a deliberately engineered market crash.
The second variant of the ‘cunning plan’ interpretation is that the market reaction was anticipated by the government with the intention of providing a justification for a subsequent full budget including massive public spending cuts, as well as ‘supply side’ deregulation of labour rights, planning, and environmental standards, in order to ‘satisfy the markets’. On this account, the government manufactured the current crisis as a step to that pre-existing end goal.
In reality, it is highly unlikely that any government would deliberately create such a crisis, again because of the political consequences. Whatever any government’s agenda may be, it can only deliver it if it is in power and able to exercise power. That remains true even if the agenda is a secret one to enact some Ayn Rand-like laying waste to society and the state or, at least, a massive rolling back of the state. It still requires being in power, and being in power for a considerable amount of time, and with very little opposition or constraint. Yet some, such as Guardian journalist Polly Toynbee, think this week’s crisis will put the Conservatives out of power for a generation and many Tory MPs fear just that. But if the analysis that the government wouldn’t want a crisis because of the political consequences isn’t accepted, then why would it feel the need to provoke a crisis to justify spending cuts, rather than simply make the cuts and face the political consequences of doing so?
I suppose that those who believe the ‘cunning plan’ theory, in either variant, will never be persuaded otherwise, despite its inherent implausibility. One thing about such theories is that (ironically, rather like those of the Brexiters) they constantly twist the available evidence to ‘prove’ themselves. For example, until very recently Rishi Sunak appeared in such theories as the arch-libertarian, product of Goldman Sachs, former hedge fund partner and, supposedly, masterminding the introduction of ‘Charter Cities’ into the UK. Surely if the plan to deliberately crash the markets existed then he would be part of the government delivering it, perhaps even leading that government? And if he had been then, inevitably, that would have been cited as ‘proof’ of this secret plan. Yet, in fact, it was he who, during the leadership campaign, repeatedly denounced the “fairy tale” of Trussonomics, anticipating exactly the effects it would have on currency and bond markets and rejecting it as irresponsible.
No, just incompetence
So my own view is that, in their arrogance and delusion, this Brexit government, and its cheerleaders, really do believe it has found a new ‘unconventional’ economic model and did not expect the market reaction, and that although a full November budget was certainly planned, including the announcement of the deregulatory ‘supply side reforms’ that will supposedly deliver the growth to pay for tax cuts, it was not going to include significant spending cuts which, instead, were anticipated for after Truss had won the election on the back of what they expected to be a growing economy. Then, with the legitimacy of a fresh mandate and a compliant parliamentary majority, she would declare it was time to shrink public spending but without coupling that with the tax cuts that would already be in place.
If my interpretation is right, the government’s plan is now in tatters, and the expectation is that the November budget will feature huge spending cuts (£) (and perhaps reversing the tax cuts, as some Tory MPs want, which can’t be ruled out though it seems unlikely at the moment). That may seem to be the same outcome as version two of the ‘cunning plan’ that I’ve rejected, but my point is that the government would not, from choice, have initiated spending cuts before the election but afterwards, because of the political unpopularity of such cuts. Otherwise, why not just have held a normal budget this Autumn, featuring both tax and spending cuts, avoiding a market crisis altogether, taking a political hit, no doubt, but nothing compared to that which they now face.
For this government was already politically weak, and as a result of this crisis is now much weaker. Although the libertarian cabal has taken control of the government, both it and Truss have many opponents amongst MPs and, as I remarked in a post during the leadership campaign, the current Tory Party is so riven by factions as to be unleadable, with rebellions an ever-present possibility. This week’s crisis has laid that bare, with, almost astonishingly given how new her premiership is, reports of letters of no confidence in Truss being submitted by some MPs and threats of backbench revolts.
Crucially, the latest opinion poll, published yesterday evening, shows a massive 33% Labour lead, an increase of 16% since the mini-budget. That may not last, but it’s very possible that the government will not recover from this crisis, rather as happened after Black Wednesday in 1992 when the immediate fall in the polls was actually smaller.
It’s not just a matter of the electorate reacting fearfully to headlines of market turmoil and the sense that the government has lost control, it’s the impact on prices, most obviously petrol, and on mortgages, with several major lenders withdrawing fixed-rate offers this week and rates certain to increase, as well as predicted significant falls in house prices, perhaps by as much as 15%. This comes on top of the acute existing energy and general inflationary problems voters face, and their negative reaction can only be compounded if this crisis is immediately followed by, and seen to be the cause of, a new round of deeply unpopular ‘austerity’ spending cuts. The consequence is that Truss is now much less likely to win the next election and, possibly, won’t even survive until then.
Ultimately, the key point as regards the competence of this government by cult is that actually it’s irrelevant whether the crisis was the unexpected consequence of last Friday’s mini-budget decisions or was indeed ‘the plan’. Either the government was too incompetent to anticipate the scale of market reaction, or too incompetent to anticipate the scale of the political consequences of that reaction.
The dangers of cultism
The question about design versus incompetence has a wider significance. Throughout the Brexit process there have always been some, mainly remainers, who are adamant that it is driven by Machiavellian master strategists who conceal themselves behind a façade of stupidity and incompetence. To my mind, it is an absurd notion: not only did the Brexiters never have a single, unified, strategy but also everything I have seen or heard about them suggests that they really are just as incompetent in private as in public.
So now that we have a government of the libertarian Brexiters, it genuinely believes – egged on by its think tank advisors – that it is in possession of a new truth, one despised and ignored by the ‘experts’ whom they see as financially and intellectually invested in the ‘old way’ of doing things. That truth informs the fantasy economics of this ‘budget for growth’ but encompasses the entirety of the Brexit project, including the persistent, hubristic delusion of the UK’s power to dictate terms to the world around it and the fantasy which accompanies it about what ‘sovereignty’ means.
It rests upon a fanaticism, completely at odds with reality, shored up by the impregnable arrogance and mulish stubbornness of mediocrity. The most dangerous thing about it is not that these fanatics refuse to listen to any warnings, whoever they come from, it is that the more they hear those warnings the more convinced they are of their own rightness. This is the Brexiter logic I have written about so many times before (I think the first time was May 2017) in which every piece of evidence that proves their claims wrong is re-interpreted as proof that they are right.
That perverse logic is compounded in government by the creation of a groupthink bunker from which all dissent is banned, external constraints regarded as sabotage, and everything outside regarded as the treacherous machinations of the enemy. Some of the responses from the Brexiters to what has happened this week show the virtual insanity that is required in order to sustain this view of the world.
The bigger picture
This is an utterly disastrous approach to running the country, and it was brutally exposed as such by what happened this week. This, I think, was about much more than the government’s plans to increase debt. For one thing, it’s just the latest example of how the pound has ebbed and flowed since Brexit, always dropping when it seemed as the most extreme Brexiters would prevail (e.g. in getting ‘no deal Brexit’) and rising when it seemed that some degree of relative pragmatism was in the offing, though overall the general trend was always downwards.
Much more importantly, whilst the Donovan comment about a ‘doomsday cult’ being in charge of the UK was at one level a specific reference to Truss’s government it surely reflects a wider view of the UK since Brexit. That view isn’t simply to do with this or that budget, or even anything specific or measurable. It’s the more general reputational and cumulative effect of seeing a country which for six years has taken bizarre decisions, picked needless fights with its allies, showcased political instability, been cavalier about institutional probity, constitutional propriety and the rule of law, and all the other pathologies of Brexit and its aftermath. Throughout all of this has been the underlying presence and power of, indeed, a doomsday cult of Brexit Ultras, impregnable to evidence and reason. We are now seen, rightly, as a country which has become less reliable, less stable and less trustworthy, and, in some fundamental way, detached from reality.
So the market chaos this week and the economic crisis it has caused are contextualised by the general lack of confidence in such a country as well as providing an example of Brexiter fantasies, and specifically those of the budget, being found out by reality. In that sense, the current crisis is a crisis of Brexit.
A nation’s currency isn’t necessarily a reliable measure of its standing, and if it is then it’s a crude one and certainly not only one, and it is affected by many things. But it tells us something. Consider, then, that since the day before the referendum, when it was worth $1.49, to the pound’s lowest point of $1.03 this week – just six short years, though how long they seem – sterling has lost an astonishing one third of its value. It’s as good a measure as any of what Brexit has cost us economically, whilst symbolizing far, far more than our economic losses.
*I usually provide links when discussing the claims and arguments of others so that readers can judge whether I am representing them accurately and fairly. In this case I haven’t found any public figure making this argument which instead comes from numerous small social media accounts and it would be unfair to identify them. But the argument is being made by a significant number of such accounts, so is clearly widespread, which is why I am discussing it.
With the advent of Truss’s premiership, they have eschewed the sidelines in favour of governing and, with a rapidity that even their sternest critics would have thought it cruel to predict, have been exposed as utterly incompetent, both politically and economically, and in the most basic of ways. It is deeply ironic that this has happened at the hand of ‘the markets’ which they so slavishly fetishize.
Anatomy of a crisis
The occasion, of course, was last Friday’s tax-cutting ‘mini-budget’. “At last! A true Tory Budget”, the Daily Mail drooled, whilst Nigel Farage simpered about “the best Conservative Budget since 1986”. Yet, whether despite or because of this fidelity to Conservatism, and as anticipated in my previous post, there was an immediate crisis in the currency and bond markets, with the value of the pound falling to its lowest ever level on Monday, and the cost of government borrowing in the form of gilts or bonds rising very sharply. Amongst numerous knock-on effects, pension funds, which invest heavily in such bonds, came within hours of mass insolvency on Wednesday afternoon, threatening a major breakdown of the financial system and requiring major emergency temporary action from the Bank of England. This, in combination, with a clear signal from the Bank that interest rates will rise in due course, which eased pressure on the pound, has effected a degree of stabilization, but markets remain jittery and it’s by no means clear that this crisis has run its course, especially as regards gilts.
These weren’t routine or trivial market movements, but an overwhelming and brutal vote of no confidence in the government’s plans. Specifically, they were a vote of no confidence in the decision to cut taxes, or not implement previously planned tax rises, and to fund this through borrowing. Again as anticipated in my last post, the government’s refusal to allow its plans to be scrutinised independently by the Office for Budget Responsibility added to market alarm. So, too, did Chancellor Kwasi Kwarteng’s casual reaction over the weekend, even suggesting further tax cuts to come. The rout continued on Monday when, as Paul Donovan, Chief Economist at UBS Global Wealth Management, put it, “investors seem to regard the UK Conservative Party as a doomsday cult”.
Throughout the week, the absence of public statements from Truss or Kwarteng compounded this impression, and when Truss did emerge on Thursday morning it was to re-confirm the government’s policy and downplay the market reaction, as well as denying it had anything much to do with the mini-budget. To the extent she admitted any connection it is the false one that markets didn’t like the costs of the energy bill support part of the budget, when in fact it was the tax cuts. It has since emerged that this and the equally false claim that what is happening in the markets is a global event due to the Ukraine War rather than something specifically affecting the UK are to be the government’s lines of defence.
Amongst the most significant events was when, on Tuesday, the International Monetary Fund (IMF) issued what BBC Economics Editor Faisal Islam described as a “stinging and unusual rebuke” to the UK. What made it so unusual was that such IMF warnings are usually made to emerging markets, not leading global economies. I mentioned in my previous post that aspects of the economic situation resemble those which occasioned the IMF’s 1976 bailout of the UK, and its statement this week that it is “closely monitoring” developments in the UK carried echoes of that. It was also, like the comments of other international players and the decisions taken by traders, a reminder that, no matter what Brexiter ‘sovereignty’ fantasists may think, the UK can never be ‘independent’ of the wider world within which it is a relatively small player. Most fundamentally, the Brexiters’ belief that they can create their own reality, and that all opposition can be swept aside as ‘Project Fear’ or ‘remainer sabotage’, was tested almost to the point of destruction.
These events have been widely reported and there’s no point in me adding more to that. Instead, I want to tease out more about the Brexit aspects and implications.
The Brexit mini-budget
At one level, the mini-budget had very little to do with Brexit in that, so far as I can see, the only provision within it that wouldn’t have been possible whilst a member of the EU is the planned removal of the cap on bankers’ bonuses. That isn’t unimportant, politically, but it’s not what spooked the markets. However, it is the budget of the Brexit Ultras and it is intimately bound up with Brexit. In case anyone doubts that, it was underlined by Farage’s endorsement. Even more explicitly (£), John Longworth, one of the most immoderate of the Ultras, regards it as part of Truss’s battle “for the future of Brexit Britain”. It’s a sentiment widely shared in Brexiter circles, with the Bruges Group tweeting that “remain media are talking up market panic … to derail Brexit”.
So, given that the Brexiters themselves regard the mini-budget as integral to Brexit, it’s reasonable to say, as Robert Shrimsley of the Financial Times did (£), that “Brexit ideology lies behind the UK’s market rout”. It’s abundantly clear to even the feeblest intelligence that those Brexiters now include Truss, for all the fury of Dominic Cummings’s denials (directed at me!) on the inane grounds that she supported remain in 2016. As I pointed out during the campaign, she is now a ‘born again Ultra’, perhaps the more fanatical for being so, and was extravagantly endorsed by the leading Ultras, making the fact that she was once a remainer the most tedious and least relevant thing to say about her.
As so often before, Brexiter responses to the crisis they created have been confused and contradictory. Some in the government prissily said they could not comment on market events, as if some new Trappist ordinance of political propriety has been invented. Others downplayed what has happened, suggesting that the market reaction is either trivial or transient, or even that it has little or nothing to do with the budget but is simply a result of a strengthening dollar (which doesn’t explain why the pound fell against all major currencies, or what happened in the bond market). Outrageously, some, like Crispin Odey, hedge fund manager, Tory and Vote Leave donor, and sometime employer of Kwarteng, blamed “remainers”. Peak insanity was reached by Daniel Hannan, who blamed the crash not on the mini-budget, but market fears of a Labour government!
In addition, or instead, some Brexiters blamed the Bank of England (BoE) for having failed to increase interest rates by enough, early enough, or to have reacted immediately to the crisis so as to support sterling and control inflation. That argument is more complicated than their others. There is a case that last week’s pre-budget interest rate rise should have been larger, although it’s not a straightforward one because doing so would also have been likely to impact on the cost-of-living crisis by pushing up mortgage rates.
Nevertheless, it was the government’s mini-budget, not the BoE, that caused this crisis and there is something bizarre about a government simultaneously taking inflationary measures it says will boost economic growth, whilst relying on the BoE to take measures to reduce inflation and choke off growth. Indeed, part of the reason for market nervousness is that the institutions of financial and economic governance are not acting in a consistent and coordinated way, something flagged up by Mark Carney, the former BoE Governor whose actions did much to preserve a degree of economic stability after the Brexit referendum vote. Perhaps the BoE could have acted earlier, though had it done so it's easy to predict that then it would have been accused of overreaction and of trying to undermine government policy. In any case, what is even more bizarre is the spectacle of Brexiters, with their disdain for experts, technocrats and unelected bureaucrats, positioning the BoE as having responsibility to save the government from itself. Or perhaps it is not bizarre, so much as a reflection of the Brexiters’ reflex refusal ever to take responsibility for anything even when in government.
Government by cultists
That refusal has as its counterpart the distinctively Brexity idea, now taken over wholesale by this Brexit government, that they are beleaguered revolutionaries of true Conservativism fighting the (presumably false) conservatism of ‘the Establishment’. The notion of Brexit as an anti-Establishment insurgency has been a ludicrous one ever since the 2016 referendum was won, and Brexit became adopted as the central policy and national strategy. It is even more so now that the Brexit Ultras are unequivocally in charge of government, though of course it is a standard populist trope, familiar from the Trump presidency.
What we have seen this week is that the Brexiters have added ‘the markets’ to the increasingly long and diverse list – encompassing the ‘Woke’ Blob, the civil service in general and the Treasury in particular, the BoE, remainers, rejoiners, the National Trust, the BBC – of enemy forces they must confront in the name of revolutionary purity.
Longworth explicitly included the City in this list, whilst unnamed government figures suggested that traders were enacting “a plot by the left” which will have come as a surprise to them. Similarly, the Daily Mail reported that senior Tories blame “City Boys” for “sparking economic chaos” with traders “trying to make money out of bad news”. Well colour me shocked. Haven’t these free-market ideologues worked out that ‘trying to make money’ is what traders always do, indeed it’s all that they do? Do they think that ‘City Boys’ care about making government policy look good? And aren’t these the same ‘City Boys’ who, according to Kwarteng, are the brightest and the best who must be encouraged to come to London by uncapped bonuses? Aren’t they, for that matter, good ol’ City Boys like Crispin Odey?
The IMF, which has long been on the Brexiters’ list of enemies, also came under attack for its comments. For example, Brexiter economist Andrew Lilico was outraged by its “left-wing” intervention, to the point that he advocated the UK should “withhold its IMF contributions”. It is a strange world in which the IMF is considered ‘left-wing’ (or even, as Brexit Party ex-MEP Lance Forman had it, “socialist” and under the influence of the EU), and the idea of withholding contributions seems to conjure up a vision where Brexit is the gateway to exiting any and every international institution, in a permanent revolution of endless Brexits.
Also triggered by the IMF, David Frost opined, contradictorily, that its comments were “somewhat eccentric” yet reflected its “highly conventional approach”. This is indicative of the fact that what is at stake is more than Brexiter whinging about the enemies that beset them. This government, and its semi-intellectual underlabourers in think tanks and the media, are convinced that they are the custodians of a new truth. The markets and their economists are “attached to the old way of doing things” as Patrick Minford put it, to the extent that “there is no sterling crisis except in the minds of idiots” (£). Similarly the BoE has “not got the memo” about the “economic consensus crumbling” according to Paul Marshall (£), investment manager and Vote Leave donor. Thus arch-Brexiter journalist Allister Heath insists (£) Liz Truss must “hold her nerve” and defy the “orthodoxy” of “the elites”.
Their problem is that, as the market reaction shows, the ‘old ways’ still hold and the ‘economic consensus’ remains. Calling it an “orthodoxy” is accurate, but that very accuracy shows why decisions to “defy” it are foolish. That’s why investors regard the Tory government as a ‘doomsday cult’, and responding that investors are ‘idiots’, ‘conventional’ or even ‘socialists’ makes no difference, except perhaps to re-enforce them in that view.
As I put it in my last blog, traders simply don’t care about the theories of Patrick Minford, or of the broader IEA-derived analysis of the cultist government. Indeed, one of the few semi-amusing features of Brexit is the spectacle of all these free-trade, free-market economists going into contortions to explain how erecting trade barriers doesn’t damage trade and, now, why markets don’t understand how to price currencies or debt. It’s this stupidity that accounts for the fact that, apparently, market traders talk of the demand for a “moron risk premium” in order to hold sterling assets and fund UK debt.
But is there a cunning plan?
However, there is a different interpretation of all this doing the rounds on social media*, in which, far from being utterly incompetent, the Brexit government has a skilful, if malevolent, plan. It is an interpretation which comes in two variants.
One version is that the government deliberately crashed the markets, secretly giving hedge fund traders and others – with whom the current government has strong links of networks and party funding – advance notice so that, as indeed happened, they could short the markets and make fortunes. It doesn’t really make sense, though, because no such secret information would need to be passed – it was obvious even to me, and widely predicted, what was going to happen if the mini-budget pursued the policies Truss had openly advocated during the leadership campaign. Indeed that’s why the pound was beginning to fall once it became clear she was almost certain to win.
It also doesn’t make sense given the huge political price of the crisis. Some suggest that the government is so fanatical that it does not care about winning elections, or already thinks the next election is lost, and will inflict any amount of damage in order to pave the way for disaster capitalists to swoop in. Even, some say, the government ministers devising this scenario are doing so in expectation of lucrative employment with hedge funds and the like. But I’ve never met or heard of a politician who having devoted years to a political career has so cavalier an interest in its continuing success, and it seems extremely improbable that it would characterise an entire government.
And if it really does, then why provide energy bill support, so plainly at odds with small state, libertarian ideology? Indeed that seemed to be Truss’s position early in the leadership contest, when she spoke against giving people “handouts”, only to change tack when it became clear what the political consequences would be. The same applies to the theory of a deliberately engineered market crash.
The second variant of the ‘cunning plan’ interpretation is that the market reaction was anticipated by the government with the intention of providing a justification for a subsequent full budget including massive public spending cuts, as well as ‘supply side’ deregulation of labour rights, planning, and environmental standards, in order to ‘satisfy the markets’. On this account, the government manufactured the current crisis as a step to that pre-existing end goal.
In reality, it is highly unlikely that any government would deliberately create such a crisis, again because of the political consequences. Whatever any government’s agenda may be, it can only deliver it if it is in power and able to exercise power. That remains true even if the agenda is a secret one to enact some Ayn Rand-like laying waste to society and the state or, at least, a massive rolling back of the state. It still requires being in power, and being in power for a considerable amount of time, and with very little opposition or constraint. Yet some, such as Guardian journalist Polly Toynbee, think this week’s crisis will put the Conservatives out of power for a generation and many Tory MPs fear just that. But if the analysis that the government wouldn’t want a crisis because of the political consequences isn’t accepted, then why would it feel the need to provoke a crisis to justify spending cuts, rather than simply make the cuts and face the political consequences of doing so?
I suppose that those who believe the ‘cunning plan’ theory, in either variant, will never be persuaded otherwise, despite its inherent implausibility. One thing about such theories is that (ironically, rather like those of the Brexiters) they constantly twist the available evidence to ‘prove’ themselves. For example, until very recently Rishi Sunak appeared in such theories as the arch-libertarian, product of Goldman Sachs, former hedge fund partner and, supposedly, masterminding the introduction of ‘Charter Cities’ into the UK. Surely if the plan to deliberately crash the markets existed then he would be part of the government delivering it, perhaps even leading that government? And if he had been then, inevitably, that would have been cited as ‘proof’ of this secret plan. Yet, in fact, it was he who, during the leadership campaign, repeatedly denounced the “fairy tale” of Trussonomics, anticipating exactly the effects it would have on currency and bond markets and rejecting it as irresponsible.
No, just incompetence
So my own view is that, in their arrogance and delusion, this Brexit government, and its cheerleaders, really do believe it has found a new ‘unconventional’ economic model and did not expect the market reaction, and that although a full November budget was certainly planned, including the announcement of the deregulatory ‘supply side reforms’ that will supposedly deliver the growth to pay for tax cuts, it was not going to include significant spending cuts which, instead, were anticipated for after Truss had won the election on the back of what they expected to be a growing economy. Then, with the legitimacy of a fresh mandate and a compliant parliamentary majority, she would declare it was time to shrink public spending but without coupling that with the tax cuts that would already be in place.
If my interpretation is right, the government’s plan is now in tatters, and the expectation is that the November budget will feature huge spending cuts (£) (and perhaps reversing the tax cuts, as some Tory MPs want, which can’t be ruled out though it seems unlikely at the moment). That may seem to be the same outcome as version two of the ‘cunning plan’ that I’ve rejected, but my point is that the government would not, from choice, have initiated spending cuts before the election but afterwards, because of the political unpopularity of such cuts. Otherwise, why not just have held a normal budget this Autumn, featuring both tax and spending cuts, avoiding a market crisis altogether, taking a political hit, no doubt, but nothing compared to that which they now face.
For this government was already politically weak, and as a result of this crisis is now much weaker. Although the libertarian cabal has taken control of the government, both it and Truss have many opponents amongst MPs and, as I remarked in a post during the leadership campaign, the current Tory Party is so riven by factions as to be unleadable, with rebellions an ever-present possibility. This week’s crisis has laid that bare, with, almost astonishingly given how new her premiership is, reports of letters of no confidence in Truss being submitted by some MPs and threats of backbench revolts.
Crucially, the latest opinion poll, published yesterday evening, shows a massive 33% Labour lead, an increase of 16% since the mini-budget. That may not last, but it’s very possible that the government will not recover from this crisis, rather as happened after Black Wednesday in 1992 when the immediate fall in the polls was actually smaller.
It’s not just a matter of the electorate reacting fearfully to headlines of market turmoil and the sense that the government has lost control, it’s the impact on prices, most obviously petrol, and on mortgages, with several major lenders withdrawing fixed-rate offers this week and rates certain to increase, as well as predicted significant falls in house prices, perhaps by as much as 15%. This comes on top of the acute existing energy and general inflationary problems voters face, and their negative reaction can only be compounded if this crisis is immediately followed by, and seen to be the cause of, a new round of deeply unpopular ‘austerity’ spending cuts. The consequence is that Truss is now much less likely to win the next election and, possibly, won’t even survive until then.
Ultimately, the key point as regards the competence of this government by cult is that actually it’s irrelevant whether the crisis was the unexpected consequence of last Friday’s mini-budget decisions or was indeed ‘the plan’. Either the government was too incompetent to anticipate the scale of market reaction, or too incompetent to anticipate the scale of the political consequences of that reaction.
The dangers of cultism
The question about design versus incompetence has a wider significance. Throughout the Brexit process there have always been some, mainly remainers, who are adamant that it is driven by Machiavellian master strategists who conceal themselves behind a façade of stupidity and incompetence. To my mind, it is an absurd notion: not only did the Brexiters never have a single, unified, strategy but also everything I have seen or heard about them suggests that they really are just as incompetent in private as in public.
So now that we have a government of the libertarian Brexiters, it genuinely believes – egged on by its think tank advisors – that it is in possession of a new truth, one despised and ignored by the ‘experts’ whom they see as financially and intellectually invested in the ‘old way’ of doing things. That truth informs the fantasy economics of this ‘budget for growth’ but encompasses the entirety of the Brexit project, including the persistent, hubristic delusion of the UK’s power to dictate terms to the world around it and the fantasy which accompanies it about what ‘sovereignty’ means.
It rests upon a fanaticism, completely at odds with reality, shored up by the impregnable arrogance and mulish stubbornness of mediocrity. The most dangerous thing about it is not that these fanatics refuse to listen to any warnings, whoever they come from, it is that the more they hear those warnings the more convinced they are of their own rightness. This is the Brexiter logic I have written about so many times before (I think the first time was May 2017) in which every piece of evidence that proves their claims wrong is re-interpreted as proof that they are right.
That perverse logic is compounded in government by the creation of a groupthink bunker from which all dissent is banned, external constraints regarded as sabotage, and everything outside regarded as the treacherous machinations of the enemy. Some of the responses from the Brexiters to what has happened this week show the virtual insanity that is required in order to sustain this view of the world.
The bigger picture
This is an utterly disastrous approach to running the country, and it was brutally exposed as such by what happened this week. This, I think, was about much more than the government’s plans to increase debt. For one thing, it’s just the latest example of how the pound has ebbed and flowed since Brexit, always dropping when it seemed as the most extreme Brexiters would prevail (e.g. in getting ‘no deal Brexit’) and rising when it seemed that some degree of relative pragmatism was in the offing, though overall the general trend was always downwards.
Much more importantly, whilst the Donovan comment about a ‘doomsday cult’ being in charge of the UK was at one level a specific reference to Truss’s government it surely reflects a wider view of the UK since Brexit. That view isn’t simply to do with this or that budget, or even anything specific or measurable. It’s the more general reputational and cumulative effect of seeing a country which for six years has taken bizarre decisions, picked needless fights with its allies, showcased political instability, been cavalier about institutional probity, constitutional propriety and the rule of law, and all the other pathologies of Brexit and its aftermath. Throughout all of this has been the underlying presence and power of, indeed, a doomsday cult of Brexit Ultras, impregnable to evidence and reason. We are now seen, rightly, as a country which has become less reliable, less stable and less trustworthy, and, in some fundamental way, detached from reality.
So the market chaos this week and the economic crisis it has caused are contextualised by the general lack of confidence in such a country as well as providing an example of Brexiter fantasies, and specifically those of the budget, being found out by reality. In that sense, the current crisis is a crisis of Brexit.
A nation’s currency isn’t necessarily a reliable measure of its standing, and if it is then it’s a crude one and certainly not only one, and it is affected by many things. But it tells us something. Consider, then, that since the day before the referendum, when it was worth $1.49, to the pound’s lowest point of $1.03 this week – just six short years, though how long they seem – sterling has lost an astonishing one third of its value. It’s as good a measure as any of what Brexit has cost us economically, whilst symbolizing far, far more than our economic losses.
*I usually provide links when discussing the claims and arguments of others so that readers can judge whether I am representing them accurately and fairly. In this case I haven’t found any public figure making this argument which instead comes from numerous small social media accounts and it would be unfair to identify them. But the argument is being made by a significant number of such accounts, so is clearly widespread, which is why I am discussing it.
Friday, 23 September 2022
Strange times
What a fortnight to have been on holiday from blogging! That Liz Truss would become Prime Minister was, of course, expected; that the Queen would die two days later was not. One consequence of this conjuncture was to virtually suspend normal politics until this week thus muffling Truss’s early decisions. But perhaps we will not see a return to normal. It’s possible that the end of the Queen’s long reign will provoke new questioning of our politics. And, with more certainty, there’s a good case that Truss’s government is going to be unlike any we have seen before.
Death of a Queen
The Queen’s death was plainly a major historical event, but it might prove to be more than an event by triggering a process of national reflection. Two years ago, I wrote an article in Byline Times anticipating that her death could have such an effect, initiating or intensifying a conversation about Britain’s modern history and contemporary place in the world. There are already signs of it, interesting examples including Lewis Goodall’s reflections on ‘The Queue’ and a debate between the twice Orwell Prize longlisted journalist Nesrine Malik and leading historian Professor David Edgerton, though if it becomes widespread it won’t happen simply by formalised discussion so much as by a gradual seepage into public discourse.
It will entail much more than Brexit but it would encompass Brexit, if only because the Queen’s death ends one of the last direct links to the Second World War, which looms so large in the historical reference points for Brexit. But that is only a symptom of the more general way that, without many people really recognizing it at the time, the 2016 referendum was a kind of unacknowledged conversation about, precisely, Britain’s modern history and contemporary place in the world. It wasn’t explicitly couched in those terms, or if so then rarely, perhaps because both sides expected ‘remain’ to win. Nevertheless, both as an economic proposition about trading relationships and a political proposition about national sovereignty – and about how those things related to the fifty years of EU membership – this is what was at stake.
So, unwittingly, we had a national conversation but botched it by not knowing that’s what it was and not understanding what we were talking about. Largely as a result of that botch, the actual consequences of Brexit are still only gradually being uncovered. Yet, already, the blithe assumptions about the ‘sunny uplands’ that awaited Britain have been brutally exposed as false. Just this week, Truss has publicly acknowledged that one of the key ‘prizes’ (though in fact always of very limited value) of Brexit, a UK-US trade deal, is not even remotely in prospect. Though almost casually made, it is in itself a huge admission of failure, whilst exemplifying the wider failure of all the Brexiters’ promises.
The failure of Brexit
For to everyone apart from the diehards, who are so invested in Brexit that nothing would persuade them otherwise, it is now plain that Brexit has been, and will continue to be, hugely damaging to the UK. It simply isn’t viable as a strategy within a world of regional economic and trade blocs, and of trans-national regulatory systems, and no amount of ‘Global Britain’ blather can make it so. Relatedly, the idea of a post-Brexit geo-political ‘pivot’ to the Indo-Pacific, always a fantasy, has been shredded by the Ukraine War. Whether at the level of political alliances or of energy co-dependence, as well as at the levels of trade and regulation, the UK’s divorce from the EU has been exposed as folly. Hence only 27% of the population now think that leaving the EU has had a positive effect on the country (48% negative, 18% no difference, 8% don’t know), and although, despite that, 38% still think that leaving was the right thing to do (51% wrong, 11% don’t know) this has now been consistently the minority view throughout almost the entire post-referendum period.
In the process of enacting Brexit, the UK – in an almost literal sense, since the Brexiter fantasy involves a denial of geographical reality – has been misplaced in the world, and therefore the UK’s place in the world – in a metaphorical, geo-political sense – has been mislaid. Moreover, the very existence of a United Kingdom of Great Britain and Northern Ireland has been put under new strains. That is in no small part due to having treated the referendum result as binding on those parts of the Union that didn’t vote for it. And that in turn is an aspect of Brexit being pursued in the hardest of forms when, in any form, it only briefly had the narrowest margin of support even treating the whole of the UK as a single entity.
Imagine that Brexit was a success
So, in summary, whilst the Queen’s death, marking a fracture in, effectively, the entire post-war history of the nation, would always have had the possibility of opening profound questions about modern Britain, that possibility has been given a particular salience by Brexit. For her death has coincided with the pursuit of a new national strategy which is manifestly failing and which is clearly and consistently lacking majority support (and, as an interesting aside, it seems to have been inadvertently revealed this week that, contrary to reports at the time, the Queen was not in favour of Brexit).
Indeed, it’s highly revealing to consider just how different things would be if Brexit had been anything approaching the success its advocates promised. In those circumstances, the national mood (if there is really such a thing) would undoubtedly still be reflective about Queen Elizabeth’s death, but at the same time confident and united in being at the start of the exciting new journey of national renewal which Brexit was already beginning to deliver. Perhaps it would even be quietly muttered that, noble as the Queen had been, she had reigned over a nation that had given in to precisely the ‘declinism’ to which Brexit was the solution. Time, indeed, for a change to a new Carolean era of prosperity and optimism.
Instead this huge symbolic rupture with the past has overlapped with a profound disquiet about the present and the future because of Brexit. With this occurring at a time of severe and growing economic crisis, the possibility of serious national self-reflection becomes even more likely, although where it would lead is impossible to predict and not by any means assured to be either benign or unifying.
Enter Truss
The arrival of a new Prime Minister is not an unfortunate addition to this moment of historic instability. It is, as I wrote in my previous post, the latest episode in the political instability wrought by Brexit. It also marks a distinctive moment, in that it is the first time since the referendum that the free-market, deregulatory, libertarian right strand of Brexiters has been unequivocally in control of government, with advisors drawn from its numerous thinktanks.
Of course, that strand was important before and, in conjunction with the purely nationalist and anti-immigration strands, was hugely significant in pushing for Brexit in the first place and, subsequently, for insisting it meant hard Brexit. Even so, neither Theresa May nor even Boris Johnson was ever of their number, and Johnson’s 2019 majority, which Truss inherits, was predicated on the same shape-shifting about the meaning of Brexit that the Vote Leave campaign had used to secure the vote in 2016. It’s easy to forget now, but that Vote Leave team, headed by Dominic Cummings, which was also the power behind the throne for most of Johnson’s premiership, was deeply contemptuous of the ERG and most of the Brexit Ultra MPs who are now in the ascendant.
There is no doubt that they see this (£) as their first and perhaps last chance to get ‘true Brexit’, even though what they mean by that was never put to the electorate, either in 2016 or in 2019. No longer do they think it so crucial, as they once insisted when promoting Brexit, that the people choose their rulers. That means not only that the government has little democratic legitimacy but also that it will face significant constraints on implementing its agenda. The internal contradictions of the diverse voting coalition Johnson and Cummings created have not changed, whilst Truss’s popularity amongst Tory MPs is much more limited than Johnson’s in 2019 (or May’s, in the heady days preceding the 2017 election).
Moreover, whilst some people get understandably exercised by the role of ‘Tufton Street’ thinktanks, it’s worth recalling that Johnson’s government, probably no less than Truss’s, was heavily linked to such bodies. But governments are constrained in ways that thinktanks aren’t, and even the most ardently ideological libertarian SpAD quickly finds that political reality is very different to the world of position papers and whiteboards. For example, as Martin Wolf of the FT points out (£), it is hardly compatible with Hayekian doctrine for the government to be setting a national economic growth target.
Constrained Truss
More generally, the economic circumstances of the energy crisis, inflation, public service and especially NHS crises, flagging investment, and a currency in real danger of imploding – much of which has been made worse by Brexit, and all of which comes like punches on the numerous purple bruises caused by Brexit – are more severe than any British Prime Minister has faced for decades, and will place significant limits on Truss’s freedom of action. The most obvious consequence of this is that, “libertarian revolutionary” as she may be, Truss is about to preside over a huge expansion of government spending and debt to subsidise energy bills because of the unavoidable exigencies of the moment and in direct contradiction to the position she held against ‘handouts’ only a few weeks ago.
To the extent it has any coherence at all, ‘Trussonomics’ will repeatedly run up against these political constraints. Its guiding theme of ‘trickle-down’ economics, the discredited theory which informs tax cuts and the decision to lift the cap on bankers’ bonuses, is completely at odds with the politics of a country facing a profound cost-of-living crisis. Strangely, the chosen leitmotif of a relentless focus on GDP growth (£) ignores one of the populist lessons of the Brexit campaign – ‘that’s your GDP!’ – which informed the now abandoned rhetoric of the ‘levelling up agenda’.
Nor is the plan to review the restriction on working hours inherited from the EU Working Time Directive, for all that it is a longstanding cause celebre for Brexiters, one with obvious populist appeal (note, too, that it is only a ‘review’: like so many deregulatory reviews initiated since Brexit it may well come to nothing once the practical realities emerge). Indeed, as many have remarked, Truss’s early moves could hardly have given so many political hostages to the Labour Party. To that should be added the point that nor could they more clearly have fractured the already fragile coalition of support for Brexit.
Brexity Truss
In other ways, though, Truss’s approach is resolutely ‘Brexity’ and, whatever she may have thought in 2016, she must now be counted amongst the hardest of Brexiters. Apart from anything else, it is no coincidence that her economic guru is Patrick Minford, for decades an extreme and minority economic voice on Brexit and much else besides. It’s almost incredible that this Thatcherite fossil, already a schoolboy when Queen Elizabeth began her long reign, is now heavily influencing government economic policy. One thing which comes with Minford’s contrarian resentments is the familiar Brexiter hostility to the ‘economic Establishment’ and the civil service, of which the immediate decision to fire Sir Tom Scholar, Permanent Secretary to the Treasury, was emblematic.
This attracted much criticism as an unfair and foolish treatment of the civil service, but also reflects a deeper and even more dangerous thread in Brexit, which is to treat expert consensus as an ideological conspiracy against Brexiter truth. This is difficult ground, since it would plainly be wrong to assert that expert consensus is necessarily right, or is the repository of some non-ideological truth, and, for that matter, critique of the ‘Treasury view’ as a small-c conservative constraint on government ambitions isn’t confined to Brexiters. But whilst it is always possible that the consensus view in economics may be wrong, of all the forecasts of Brexit’s economic effects by far the most inaccurate was that of Minford’s Economists for Brexit group.
However, predictive track record is not what is at issue here. Ever since 2016, the repeated attacks on not just the Treasury, but the Bank of England (and especially its former Governor Mark Carney), or any individual or institution that even questions Brexiters’ claims, go well beyond the parameters of normal political and economic debate into something resembling religious sectarianism. Again, though, Truss doesn’t operate without any constraints, even in these very early days, and the backlash against Scholar’s sacking seems already to have forced her to hold back from doing the same to Sir Simon Case, the Cabinet Secretary.
Cakeist Truss
Truss also displays some of the ‘cakeism’ which did so much to transform Brexit from a political prospectus with which one might agree or disagree to a wholly dishonest project in which reality is denied in favour of quasi-religious faith. In particular, it can be seen in the ramping up of public debt to cover energy bills as well as massive tax cuts. As with the cakeism of Brexit, the issue isn’t the merits of the policy as such, which can be debated, it’s the refusal to accept that the policy comes with any costs or trade-offs. It’s as if the campaigning tactic of dismissing all Brexit costs as ‘Project Fear’ has morphed into a governmental principle that rejects any notion of risk in relation to any policy at all.
That seems especially bizarre in this case, when it has been an article of faith for the Thatcherite Right that ‘the books must balance’. There’s much to debate about that proposition, too, a debate in which context matters more than framing some general rule. In the current context, not least because of the damage Brexit has already done to sterling since the referendum, the principal risk is a full-scale run on the pound, which has already been foreshadowed in the currency markets since Truss took office on her tax-cutting platform.
It’s a risk that can only be enhanced if, as reported, the government is not going to issue an economic forecast with today’s major economic statement, as the suspicion can only be that it is dire. It’s pointless anyway as others can do the sums, and the Institute for Fiscal Studies has already warned that the government’s debt plans are “unsustainable”, highlighting the particular impact of the scale of the anticipated tax cuts but also reflecting the government’s refusal to fund the energy support package through tax-raising measures.
Delusional Truss
This matters because even if Truss and Kwasi Kwarteng were completely right to pour scorn on the Treasury view of the world that doesn’t affect the fact that currency traders hold very similar views, and act on them, and they can’t be sacked or ignored. As with Brexit dogma in general, reality can be denied and domestic critics derided as fearmongers or bullied into silence, but when that dogma meets the external world, whether that be currency markets or the negotiating power of the EU, reality always wins. Truss may put her faith in Patrick Minford but, to put it brutally and crudely, currency traders don’t give the tiniest f*** about Minford or his theories, and nor do investors or any other economic actor. Thus market analysts now say there’s a 25% chance that we will soon see pound-dollar parity for the first time ever.
The other big danger, given ballooning government debt, is that, as Mark Carney long ago warned, ‘the kindness of strangers’ could come to a ‘sudden stop’, with international investors refusing to go on funding government borrowing. For, of course, it is not ‘kindness’ that is at issue, but a cold-eyed assessment of risks and rewards. Although few commented on it at the time, I pointed out last April (see footnote) that the current account deficit was becoming alarmingly high and the forecasts were for it to get worse. Now (although we can’t be certain of the figures yet) it is set to increase dramatically.
In fact, as Paul Mason wrote this week “all six dials on the dashboard of the UK economy: inflation, investment, trade, debt, sterling and the current account [are] flashing red”. For Truss, to proclaim, as she did this week, that her “belief is that Britain’s economic fundamentals are strong” shows precisely the Brexiter logic that ‘belief’ equates with truth. Indeed it’s only last month that she was boosterishly proclaiming that recession was “not inevitable”, despite Bank of England forecasts: yesterday, as interest rates rose to their highest level since 2008, it became clear that even as she spoke the economy was already in recession.
Northern Irish uncertainties
That reality trumps faith and fantasy still isn’t a lesson that Brexiters seem able to learn, though. Nowhere is that more so than in relation to the still ongoing Northern Ireland Protocol debacle. There’s certainly a possibility of a ‘re-set’ now, especially since, as the government accepts there will be no trade deal with the US, the only barely credible reason for refusing SPS alignment has disappeared. And any half-way sensible government faced with as many serious problems as this one would certainly not add to them with the entirely self-imposed one of reneging on the Protocol. Doing so is not just profoundly damaging the UK’s international reputation and relations, it is also exacerbating the energy crisis and prolonging the damaging exclusion of the UK from EU science programmes as well as, down the line, risking the provocation of a trade war with the EU and a rupture with the US.
But, then, a half-way sensible government wouldn’t have appointed ERG Brexiter hardliners Chris Heaton-Harris and Steve ‘hard man’ Baker as, respectively, Northern Ireland Secretary and Minister, suggesting an intention for confrontation. Against that, Heaton-Harris has been making conciliatory statements, explicitly suggesting he shouldn’t be judged on his Brexiter background. In the last few hours there have also been signs of a more moderate approach from the government, with the threat of unilateral derogation from the Protocol apparently lifted (£).
If so, that’s welcome, though note that it would be a second early U-turn from Truss on her campaign promises. It’s too early to judge yet, and we’ve been round these loops of conciliation and aggression so many times, but if a deal is really going to be done expect at least rumblings of rebellion from the Ultras that, yet again, Brexit is being ‘betrayed’. Baker, in particular, who gave such strong support to Truss’s leadership bid might be expected to make that charge. The same old Brexit rows that May and Johnson faced lie in wait for Truss. Much more on all this in the coming days and weeks, no doubt.
A very peculiar government
As I write this analysis, and having read those of many others, it strikes me that it is almost impossible to articulate a coherent account of Truss’s government because it is one of the strangest this country has had. It does not even seem to know how to describe itself. It blends aspects of the economics that led to the 1976 IMF bailout – for context, just as the Queen was about to celebrate the mere Silver Jubilee of her reign – with aspects of the Thatcherism that subsequently grew out of that crisis. But whereas Thatcherites had the bedrock of realism to know that ‘you can’t buck the market’, Truss’s Brexiter Thatcherites think that true faith can trump reality.
The government’s avowed priority is economic growth, but it has an undiscussable commitment to hard Brexit, which is the most permanent drag on growth and which itself results in large part from a rejection of the Thatcher-inspired single market. It appears totally uninterested in the horrific impact of Brexit on small exporting firms, which were not only iconic for Thatcher but which are central to economic growth. In fact, it isn’t notably pro-business of any size – even banks aren’t hugely exercised about being able to pay bonuses – so much as in thrall to a ‘Janet and John’ ideological theory about capitalism that has no relationship to actual business needs and priorities.
It is a post-Brexit government, with Brexiters in every key position, but very little of its policy agenda seems to require Brexit. That is certainly true of the core tax-cutting policies, and also of the reported plans for new ‘investment zones’ with lower taxes and planning deregulation (these are different to Freeports but, as with Freeports, are nothing remotely like ‘Charter Cities’, despite the latest swell of social media excitement). Perhaps tellingly, the post of Minister for Brexit Opportunities has been axed, a tacit acknowledgment not just of its failure but of it being doomed to fail. As for the ‘Brexit Freedoms Bill’, wait for the arbitrary dates for dropping EU regulation to approach, and we’ll see what happens (much more on this in future posts, no doubt).
It is a government that presents itself as having a seriousness of purpose that Johnson’s administration lacked, but inherits his cakeism and vapid boosterism; as having a can-do pragmatism whilst asserting a populist preference for faith over evidence and expertise. It is small statist, whilst expanding the size of the state and rejecting ‘austerity’. It is deregulatory but largely coy about saying much about what this means in practice or how it would relate to the central task of creating growth. It acts as if it were a new government and has presented an entirely different manifesto to that of 2019, but it is reliant upon the voting coalition it inherited from 2019 (with consequences already emerging over Truss’s change in fracking policy) and has at best only a couple of years left of this parliament. It is an ideological government but without coherent ideology, and led by a dogmatist who is also an opportunist.
Perhaps more than anything else, and more dangerous than anything else, it seems like a government composed of chancers and mediocrities who are at the same time arrogantly certain of their beliefs. By an accident of circumstances, which in large part include Brexit, they have got hold of a power they have neither the competence nor the wisdom to be entrusted with, but to which they feel an unquestioning entitlement. This is the consequence of the winnowing out of any moderate or even half-way pragmatic figures in the Tory Party since the Brexit vote, to the extent that even someone like Rishi Sunak is now denounced as a ‘socialist’ and Brexit ‘compromiser’. About the best can be said for this government is that, despite earlier rumours, it seems it will not contain Iain Duncan Smith, John Redwood or David Frost, so, apparently, there are at least some depths to which it will not yet sink.
The bleak reality
Even if the strange coincidence of this new Prime Minister arriving just as the old Queen departs doesn’t lead to extensive national self-reflection, it does present an opportunity for the government. As Lord Ricketts, the former senior civil servant, wrote this week, the swell of international attention and goodwill occasioned by the Queen’s funeral could be a chance to repair the damage that Brexit has brought to international relations. So, too, might the moment of considerable national unity it brought be built on to assuage the divisions of Brexit.
But what seems far more likely is that the world sees a country that for all its faultless pageantry, its sombre and dignified mourning, has lost its way and is now further destabilised by losing one of its deepest anchors. Adrift since Brexit, it is now governed by a motley crew of over-promoted ideologues like Suella Braverman and self-important pinheads like Jacob Rees-Mogg, led by a peculiar and delusional Prime Minister. As the grandeur and collective emotions of the last couple of weeks fade, we are left with the bleak reality of a government not just incapable of resolving the dislocations – economic, geo-political, cultural, reputational – of Brexit and all that has followed, but incapable of recognizing their existence or even of caring were they to do so.
Death of a Queen
The Queen’s death was plainly a major historical event, but it might prove to be more than an event by triggering a process of national reflection. Two years ago, I wrote an article in Byline Times anticipating that her death could have such an effect, initiating or intensifying a conversation about Britain’s modern history and contemporary place in the world. There are already signs of it, interesting examples including Lewis Goodall’s reflections on ‘The Queue’ and a debate between the twice Orwell Prize longlisted journalist Nesrine Malik and leading historian Professor David Edgerton, though if it becomes widespread it won’t happen simply by formalised discussion so much as by a gradual seepage into public discourse.
It will entail much more than Brexit but it would encompass Brexit, if only because the Queen’s death ends one of the last direct links to the Second World War, which looms so large in the historical reference points for Brexit. But that is only a symptom of the more general way that, without many people really recognizing it at the time, the 2016 referendum was a kind of unacknowledged conversation about, precisely, Britain’s modern history and contemporary place in the world. It wasn’t explicitly couched in those terms, or if so then rarely, perhaps because both sides expected ‘remain’ to win. Nevertheless, both as an economic proposition about trading relationships and a political proposition about national sovereignty – and about how those things related to the fifty years of EU membership – this is what was at stake.
So, unwittingly, we had a national conversation but botched it by not knowing that’s what it was and not understanding what we were talking about. Largely as a result of that botch, the actual consequences of Brexit are still only gradually being uncovered. Yet, already, the blithe assumptions about the ‘sunny uplands’ that awaited Britain have been brutally exposed as false. Just this week, Truss has publicly acknowledged that one of the key ‘prizes’ (though in fact always of very limited value) of Brexit, a UK-US trade deal, is not even remotely in prospect. Though almost casually made, it is in itself a huge admission of failure, whilst exemplifying the wider failure of all the Brexiters’ promises.
The failure of Brexit
For to everyone apart from the diehards, who are so invested in Brexit that nothing would persuade them otherwise, it is now plain that Brexit has been, and will continue to be, hugely damaging to the UK. It simply isn’t viable as a strategy within a world of regional economic and trade blocs, and of trans-national regulatory systems, and no amount of ‘Global Britain’ blather can make it so. Relatedly, the idea of a post-Brexit geo-political ‘pivot’ to the Indo-Pacific, always a fantasy, has been shredded by the Ukraine War. Whether at the level of political alliances or of energy co-dependence, as well as at the levels of trade and regulation, the UK’s divorce from the EU has been exposed as folly. Hence only 27% of the population now think that leaving the EU has had a positive effect on the country (48% negative, 18% no difference, 8% don’t know), and although, despite that, 38% still think that leaving was the right thing to do (51% wrong, 11% don’t know) this has now been consistently the minority view throughout almost the entire post-referendum period.
In the process of enacting Brexit, the UK – in an almost literal sense, since the Brexiter fantasy involves a denial of geographical reality – has been misplaced in the world, and therefore the UK’s place in the world – in a metaphorical, geo-political sense – has been mislaid. Moreover, the very existence of a United Kingdom of Great Britain and Northern Ireland has been put under new strains. That is in no small part due to having treated the referendum result as binding on those parts of the Union that didn’t vote for it. And that in turn is an aspect of Brexit being pursued in the hardest of forms when, in any form, it only briefly had the narrowest margin of support even treating the whole of the UK as a single entity.
Imagine that Brexit was a success
So, in summary, whilst the Queen’s death, marking a fracture in, effectively, the entire post-war history of the nation, would always have had the possibility of opening profound questions about modern Britain, that possibility has been given a particular salience by Brexit. For her death has coincided with the pursuit of a new national strategy which is manifestly failing and which is clearly and consistently lacking majority support (and, as an interesting aside, it seems to have been inadvertently revealed this week that, contrary to reports at the time, the Queen was not in favour of Brexit).
Indeed, it’s highly revealing to consider just how different things would be if Brexit had been anything approaching the success its advocates promised. In those circumstances, the national mood (if there is really such a thing) would undoubtedly still be reflective about Queen Elizabeth’s death, but at the same time confident and united in being at the start of the exciting new journey of national renewal which Brexit was already beginning to deliver. Perhaps it would even be quietly muttered that, noble as the Queen had been, she had reigned over a nation that had given in to precisely the ‘declinism’ to which Brexit was the solution. Time, indeed, for a change to a new Carolean era of prosperity and optimism.
Instead this huge symbolic rupture with the past has overlapped with a profound disquiet about the present and the future because of Brexit. With this occurring at a time of severe and growing economic crisis, the possibility of serious national self-reflection becomes even more likely, although where it would lead is impossible to predict and not by any means assured to be either benign or unifying.
Enter Truss
The arrival of a new Prime Minister is not an unfortunate addition to this moment of historic instability. It is, as I wrote in my previous post, the latest episode in the political instability wrought by Brexit. It also marks a distinctive moment, in that it is the first time since the referendum that the free-market, deregulatory, libertarian right strand of Brexiters has been unequivocally in control of government, with advisors drawn from its numerous thinktanks.
Of course, that strand was important before and, in conjunction with the purely nationalist and anti-immigration strands, was hugely significant in pushing for Brexit in the first place and, subsequently, for insisting it meant hard Brexit. Even so, neither Theresa May nor even Boris Johnson was ever of their number, and Johnson’s 2019 majority, which Truss inherits, was predicated on the same shape-shifting about the meaning of Brexit that the Vote Leave campaign had used to secure the vote in 2016. It’s easy to forget now, but that Vote Leave team, headed by Dominic Cummings, which was also the power behind the throne for most of Johnson’s premiership, was deeply contemptuous of the ERG and most of the Brexit Ultra MPs who are now in the ascendant.
There is no doubt that they see this (£) as their first and perhaps last chance to get ‘true Brexit’, even though what they mean by that was never put to the electorate, either in 2016 or in 2019. No longer do they think it so crucial, as they once insisted when promoting Brexit, that the people choose their rulers. That means not only that the government has little democratic legitimacy but also that it will face significant constraints on implementing its agenda. The internal contradictions of the diverse voting coalition Johnson and Cummings created have not changed, whilst Truss’s popularity amongst Tory MPs is much more limited than Johnson’s in 2019 (or May’s, in the heady days preceding the 2017 election).
Moreover, whilst some people get understandably exercised by the role of ‘Tufton Street’ thinktanks, it’s worth recalling that Johnson’s government, probably no less than Truss’s, was heavily linked to such bodies. But governments are constrained in ways that thinktanks aren’t, and even the most ardently ideological libertarian SpAD quickly finds that political reality is very different to the world of position papers and whiteboards. For example, as Martin Wolf of the FT points out (£), it is hardly compatible with Hayekian doctrine for the government to be setting a national economic growth target.
Constrained Truss
More generally, the economic circumstances of the energy crisis, inflation, public service and especially NHS crises, flagging investment, and a currency in real danger of imploding – much of which has been made worse by Brexit, and all of which comes like punches on the numerous purple bruises caused by Brexit – are more severe than any British Prime Minister has faced for decades, and will place significant limits on Truss’s freedom of action. The most obvious consequence of this is that, “libertarian revolutionary” as she may be, Truss is about to preside over a huge expansion of government spending and debt to subsidise energy bills because of the unavoidable exigencies of the moment and in direct contradiction to the position she held against ‘handouts’ only a few weeks ago.
To the extent it has any coherence at all, ‘Trussonomics’ will repeatedly run up against these political constraints. Its guiding theme of ‘trickle-down’ economics, the discredited theory which informs tax cuts and the decision to lift the cap on bankers’ bonuses, is completely at odds with the politics of a country facing a profound cost-of-living crisis. Strangely, the chosen leitmotif of a relentless focus on GDP growth (£) ignores one of the populist lessons of the Brexit campaign – ‘that’s your GDP!’ – which informed the now abandoned rhetoric of the ‘levelling up agenda’.
Nor is the plan to review the restriction on working hours inherited from the EU Working Time Directive, for all that it is a longstanding cause celebre for Brexiters, one with obvious populist appeal (note, too, that it is only a ‘review’: like so many deregulatory reviews initiated since Brexit it may well come to nothing once the practical realities emerge). Indeed, as many have remarked, Truss’s early moves could hardly have given so many political hostages to the Labour Party. To that should be added the point that nor could they more clearly have fractured the already fragile coalition of support for Brexit.
Brexity Truss
In other ways, though, Truss’s approach is resolutely ‘Brexity’ and, whatever she may have thought in 2016, she must now be counted amongst the hardest of Brexiters. Apart from anything else, it is no coincidence that her economic guru is Patrick Minford, for decades an extreme and minority economic voice on Brexit and much else besides. It’s almost incredible that this Thatcherite fossil, already a schoolboy when Queen Elizabeth began her long reign, is now heavily influencing government economic policy. One thing which comes with Minford’s contrarian resentments is the familiar Brexiter hostility to the ‘economic Establishment’ and the civil service, of which the immediate decision to fire Sir Tom Scholar, Permanent Secretary to the Treasury, was emblematic.
This attracted much criticism as an unfair and foolish treatment of the civil service, but also reflects a deeper and even more dangerous thread in Brexit, which is to treat expert consensus as an ideological conspiracy against Brexiter truth. This is difficult ground, since it would plainly be wrong to assert that expert consensus is necessarily right, or is the repository of some non-ideological truth, and, for that matter, critique of the ‘Treasury view’ as a small-c conservative constraint on government ambitions isn’t confined to Brexiters. But whilst it is always possible that the consensus view in economics may be wrong, of all the forecasts of Brexit’s economic effects by far the most inaccurate was that of Minford’s Economists for Brexit group.
However, predictive track record is not what is at issue here. Ever since 2016, the repeated attacks on not just the Treasury, but the Bank of England (and especially its former Governor Mark Carney), or any individual or institution that even questions Brexiters’ claims, go well beyond the parameters of normal political and economic debate into something resembling religious sectarianism. Again, though, Truss doesn’t operate without any constraints, even in these very early days, and the backlash against Scholar’s sacking seems already to have forced her to hold back from doing the same to Sir Simon Case, the Cabinet Secretary.
Cakeist Truss
Truss also displays some of the ‘cakeism’ which did so much to transform Brexit from a political prospectus with which one might agree or disagree to a wholly dishonest project in which reality is denied in favour of quasi-religious faith. In particular, it can be seen in the ramping up of public debt to cover energy bills as well as massive tax cuts. As with the cakeism of Brexit, the issue isn’t the merits of the policy as such, which can be debated, it’s the refusal to accept that the policy comes with any costs or trade-offs. It’s as if the campaigning tactic of dismissing all Brexit costs as ‘Project Fear’ has morphed into a governmental principle that rejects any notion of risk in relation to any policy at all.
That seems especially bizarre in this case, when it has been an article of faith for the Thatcherite Right that ‘the books must balance’. There’s much to debate about that proposition, too, a debate in which context matters more than framing some general rule. In the current context, not least because of the damage Brexit has already done to sterling since the referendum, the principal risk is a full-scale run on the pound, which has already been foreshadowed in the currency markets since Truss took office on her tax-cutting platform.
It’s a risk that can only be enhanced if, as reported, the government is not going to issue an economic forecast with today’s major economic statement, as the suspicion can only be that it is dire. It’s pointless anyway as others can do the sums, and the Institute for Fiscal Studies has already warned that the government’s debt plans are “unsustainable”, highlighting the particular impact of the scale of the anticipated tax cuts but also reflecting the government’s refusal to fund the energy support package through tax-raising measures.
Delusional Truss
This matters because even if Truss and Kwasi Kwarteng were completely right to pour scorn on the Treasury view of the world that doesn’t affect the fact that currency traders hold very similar views, and act on them, and they can’t be sacked or ignored. As with Brexit dogma in general, reality can be denied and domestic critics derided as fearmongers or bullied into silence, but when that dogma meets the external world, whether that be currency markets or the negotiating power of the EU, reality always wins. Truss may put her faith in Patrick Minford but, to put it brutally and crudely, currency traders don’t give the tiniest f*** about Minford or his theories, and nor do investors or any other economic actor. Thus market analysts now say there’s a 25% chance that we will soon see pound-dollar parity for the first time ever.
The other big danger, given ballooning government debt, is that, as Mark Carney long ago warned, ‘the kindness of strangers’ could come to a ‘sudden stop’, with international investors refusing to go on funding government borrowing. For, of course, it is not ‘kindness’ that is at issue, but a cold-eyed assessment of risks and rewards. Although few commented on it at the time, I pointed out last April (see footnote) that the current account deficit was becoming alarmingly high and the forecasts were for it to get worse. Now (although we can’t be certain of the figures yet) it is set to increase dramatically.
In fact, as Paul Mason wrote this week “all six dials on the dashboard of the UK economy: inflation, investment, trade, debt, sterling and the current account [are] flashing red”. For Truss, to proclaim, as she did this week, that her “belief is that Britain’s economic fundamentals are strong” shows precisely the Brexiter logic that ‘belief’ equates with truth. Indeed it’s only last month that she was boosterishly proclaiming that recession was “not inevitable”, despite Bank of England forecasts: yesterday, as interest rates rose to their highest level since 2008, it became clear that even as she spoke the economy was already in recession.
Northern Irish uncertainties
That reality trumps faith and fantasy still isn’t a lesson that Brexiters seem able to learn, though. Nowhere is that more so than in relation to the still ongoing Northern Ireland Protocol debacle. There’s certainly a possibility of a ‘re-set’ now, especially since, as the government accepts there will be no trade deal with the US, the only barely credible reason for refusing SPS alignment has disappeared. And any half-way sensible government faced with as many serious problems as this one would certainly not add to them with the entirely self-imposed one of reneging on the Protocol. Doing so is not just profoundly damaging the UK’s international reputation and relations, it is also exacerbating the energy crisis and prolonging the damaging exclusion of the UK from EU science programmes as well as, down the line, risking the provocation of a trade war with the EU and a rupture with the US.
But, then, a half-way sensible government wouldn’t have appointed ERG Brexiter hardliners Chris Heaton-Harris and Steve ‘hard man’ Baker as, respectively, Northern Ireland Secretary and Minister, suggesting an intention for confrontation. Against that, Heaton-Harris has been making conciliatory statements, explicitly suggesting he shouldn’t be judged on his Brexiter background. In the last few hours there have also been signs of a more moderate approach from the government, with the threat of unilateral derogation from the Protocol apparently lifted (£).
If so, that’s welcome, though note that it would be a second early U-turn from Truss on her campaign promises. It’s too early to judge yet, and we’ve been round these loops of conciliation and aggression so many times, but if a deal is really going to be done expect at least rumblings of rebellion from the Ultras that, yet again, Brexit is being ‘betrayed’. Baker, in particular, who gave such strong support to Truss’s leadership bid might be expected to make that charge. The same old Brexit rows that May and Johnson faced lie in wait for Truss. Much more on all this in the coming days and weeks, no doubt.
A very peculiar government
As I write this analysis, and having read those of many others, it strikes me that it is almost impossible to articulate a coherent account of Truss’s government because it is one of the strangest this country has had. It does not even seem to know how to describe itself. It blends aspects of the economics that led to the 1976 IMF bailout – for context, just as the Queen was about to celebrate the mere Silver Jubilee of her reign – with aspects of the Thatcherism that subsequently grew out of that crisis. But whereas Thatcherites had the bedrock of realism to know that ‘you can’t buck the market’, Truss’s Brexiter Thatcherites think that true faith can trump reality.
The government’s avowed priority is economic growth, but it has an undiscussable commitment to hard Brexit, which is the most permanent drag on growth and which itself results in large part from a rejection of the Thatcher-inspired single market. It appears totally uninterested in the horrific impact of Brexit on small exporting firms, which were not only iconic for Thatcher but which are central to economic growth. In fact, it isn’t notably pro-business of any size – even banks aren’t hugely exercised about being able to pay bonuses – so much as in thrall to a ‘Janet and John’ ideological theory about capitalism that has no relationship to actual business needs and priorities.
It is a post-Brexit government, with Brexiters in every key position, but very little of its policy agenda seems to require Brexit. That is certainly true of the core tax-cutting policies, and also of the reported plans for new ‘investment zones’ with lower taxes and planning deregulation (these are different to Freeports but, as with Freeports, are nothing remotely like ‘Charter Cities’, despite the latest swell of social media excitement). Perhaps tellingly, the post of Minister for Brexit Opportunities has been axed, a tacit acknowledgment not just of its failure but of it being doomed to fail. As for the ‘Brexit Freedoms Bill’, wait for the arbitrary dates for dropping EU regulation to approach, and we’ll see what happens (much more on this in future posts, no doubt).
It is a government that presents itself as having a seriousness of purpose that Johnson’s administration lacked, but inherits his cakeism and vapid boosterism; as having a can-do pragmatism whilst asserting a populist preference for faith over evidence and expertise. It is small statist, whilst expanding the size of the state and rejecting ‘austerity’. It is deregulatory but largely coy about saying much about what this means in practice or how it would relate to the central task of creating growth. It acts as if it were a new government and has presented an entirely different manifesto to that of 2019, but it is reliant upon the voting coalition it inherited from 2019 (with consequences already emerging over Truss’s change in fracking policy) and has at best only a couple of years left of this parliament. It is an ideological government but without coherent ideology, and led by a dogmatist who is also an opportunist.
Perhaps more than anything else, and more dangerous than anything else, it seems like a government composed of chancers and mediocrities who are at the same time arrogantly certain of their beliefs. By an accident of circumstances, which in large part include Brexit, they have got hold of a power they have neither the competence nor the wisdom to be entrusted with, but to which they feel an unquestioning entitlement. This is the consequence of the winnowing out of any moderate or even half-way pragmatic figures in the Tory Party since the Brexit vote, to the extent that even someone like Rishi Sunak is now denounced as a ‘socialist’ and Brexit ‘compromiser’. About the best can be said for this government is that, despite earlier rumours, it seems it will not contain Iain Duncan Smith, John Redwood or David Frost, so, apparently, there are at least some depths to which it will not yet sink.
The bleak reality
Even if the strange coincidence of this new Prime Minister arriving just as the old Queen departs doesn’t lead to extensive national self-reflection, it does present an opportunity for the government. As Lord Ricketts, the former senior civil servant, wrote this week, the swell of international attention and goodwill occasioned by the Queen’s funeral could be a chance to repair the damage that Brexit has brought to international relations. So, too, might the moment of considerable national unity it brought be built on to assuage the divisions of Brexit.
But what seems far more likely is that the world sees a country that for all its faultless pageantry, its sombre and dignified mourning, has lost its way and is now further destabilised by losing one of its deepest anchors. Adrift since Brexit, it is now governed by a motley crew of over-promoted ideologues like Suella Braverman and self-important pinheads like Jacob Rees-Mogg, led by a peculiar and delusional Prime Minister. As the grandeur and collective emotions of the last couple of weeks fade, we are left with the bleak reality of a government not just incapable of resolving the dislocations – economic, geo-political, cultural, reputational – of Brexit and all that has followed, but incapable of recognizing their existence or even of caring were they to do so.
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