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.
Friday, 30 September 2022
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.
Friday, 26 August 2022
An unleadable Tory Party means post-Brexit political instability will continue
In a couple of weeks we will have a new Prime Minister, bringing an end to the strangest political summer of my lifetime. It has been a summer marked by excessive heat and drought which are themselves emblematic of perhaps the most important global political issue – if there are exceptions, they would be those of actual total war or possible nuclear war – of the lifetimes of anyone alive today. There is in any case an ongoing war in Europe, which many of us see as defining of a conflict between liberal democracy and nationalist authoritarianism. And that war has precipitated a global energy crisis and exacerbated a global economic crisis.
Multiple crises with no functioning government
Domestically, that means a rapidly worsening cost of living crisis. Inflation is at its highest since the early 1980s and still rising, with households facing their largest ever recorded fall in living standards, and the Bank of England predicts five continuous quarters of economic recession. There are multiple strikes in the rail network, the docks, the courts, the postal service and elsewhere, and more to come. With a growing ‘Don’t Pay’ campaign in the face of what for many will be impossible energy bills, talk of civil unrest and disobedience does not seem hyperbolic.
There are now chronic labour shortages in almost every occupation, so that even as food prices rise to a 40-year high there is food rotting in fields for lack of people to pick or harvest it. The NHS, and especially the ambulance service, is at breaking point, as, not unrelatedly, is the social care system. In fact it is hard to find any part of the public or private sector which is not, in some way or other, under alarming strain. The beaches are awash with sewage, like a metaphor. And, though you’d hardly know it, we are still living with the effects of a pandemic, including an estimated 1.6 million people in England alone living with Long Covid, and presumably the possibility of a new wave to come.
Throughout all this, the leadership contest means there has been, in effect, no functioning government. The notional Prime Minister, rather than acting as a responsible caretaker, has spent the summer alternating between sulking, holidaying and squeezing the last drop out of the perks of his office. Any chance Boris Johnson had of a final period of dignity to set against the depraved conduct that led to his ejection has been squandered. Most Prime Ministers end up being judged less harshly by history than they are at the time of their departure; I strongly suspect that Johnson will be assessed even more critically in the future than he is now.
Post-Brexit political instability set to continue
When this strange summer ends, it will not herald the end of the period of political instability any more than the events and crises of the summer are peculiar to the season. This isn’t a holiday that has gone horribly wrong, it’s the latest instalment of a reality there is no taking a break from. That political instability began with the 2016 referendum. Having a new Prime Minister is not going to finish, but is a part of, this post-2016 story. I don’t mean that there were no political problems before, but that since then there has been a particular sort of instability and for particular reasons.
It’s not a coincidence that the new Prime Minister will be the fourth in the six years since the referendum, the same number as held office in the thirty-one years between 1979 and 2010. Nor is it a coincidence that within those six years there have also been two general elections, massive churn in the holding of ministerial posts, an illegal prorogation of parliament, a unique judgment that the government was in contempt of parliament, numerous highly unusual constitutional events, a government openly threatening to break international law, massive stresses in the relationship between Westminster and the devolved administrations, significant pressures on the Good Friday Belfast Agreement, and perhaps the most significant rifts between ministers and the civil service in modern history. All these things reflect the way that Brexit has all but overwhelmed the capacity and norms of the UK state and political institutions.
The unleadable Tory Party
Centrally implicated in all this is the ongoing convulsion of the governing Tory Party, a convulsion now so long-lived, dating as it does to the 1992 Maastricht Treaty battles, that it should be considered chronic. This isn’t the place to discuss all of that, so here I’ll just talk about the present leadership contest. The most likely winner, Liz Truss, was not the first choice of MPs, whilst 55% of the party membership think that those MPs were wrong to have ousted Johnson, a view echoed by Conservative voters and floating voters (£). This means that Truss, assuming she wins, will not be starting with a groundswell of support even from within her own party ranks. Amongst the general public, she scores negatively in views of her ability to handle the major issues (as do Sunak and Johnson). It’s unlikely that she will experience more than short-lived political ‘honeymoon’, if that.
One of the features of Tory MPs, especially since the referendum, is how undisciplined they are. So, particularly as she isn’t their own choice, Truss will find her backbenchers prone to revolt and that will be all the more so if, as rumoured, she packs the cabinet with those from the hard Brexit right wing, very possibly including preposterous blowhard David Frost, to the exclusion of ‘Red Wallers’ and ‘One Nationers’. There are even rumours that the peculiar Thatcherite has-been John Redwood will be disinterred, a word which in this case would be almost literally true. A more broad-based administration would just bring the backbench schisms into the cabinet. Already there is speculation that the weakness of her position amongst MPs will force her to call an early election, risky as that would be.
The Northern Ireland Protocol Bill (NIPB) could be an early flashpoint, if she pushes ahead with it as she has promised. Apart from facing opposition from Tories in the Lords, it’s at least possible that some of the Tory MPs who understand the damage it will do will find the courage to vote against it. If she doesn’t push ahead then, almost certainly, the ERG will mount an immediate attack. The same is true if, as some commentators speculate, she ditches the generally hard right line she has taken during the leadership contest and once more re-invents herself as some sort of consensual centrist. As much as, if not more than, her predecessors she will be constantly vulnerable to ERG extremism, whether on Brexit or other issues.
Even without that ever-present pressure, Truss is extremely ill-equipped to deal with the multiple crises she will face. She shows little sign of having the intellectual or interpersonal skills needed, and her sub-Johnson boosterism is not going to carry her very far in the present context. Attacking doomsters, gloomsters and ‘declinists’ may have some appeal to party members. To a country feeling distinctly gloomy, if not doomed, and visibly declining, its appeal will be very limited indeed.
It may be that, as many expect, and as Rees-Mogg and David Frost amongst others are urging, she will launch into a libertarian, deregulatory frenzy, delighting the Tory right by ‘delivering’ on what they meant by Brexit. If so, that is very unlikely to appeal to a country – including many Tory voters – that sees an urgent need not for deregulation but for, at the least, stronger and better regulation of utilities, in particular, as well as for a bigger and more interventionist State. If energy prices continue to rise as predicted then the political pressure for the latter will be irresistible. It’s also much more difficult in practice to deliver deregulation than to talk airily about making a ‘bonfire of EU regulations’, for the reasons I outlined in my previous post, the more so in the absence of any explicit political mandate or much administrative bandwidth to do so. Yet some right-wing Brexiters, such as Allister Heath (£), writing in loose-sphinctered terror of “ultra remainers mobilising to cancel it”, are convinced that “Truss is Brexit’s last hope” and rely on her to show that it can “improve lives, bolster the economy and fix broken institutions”.
It's here that a central feature of the rolling post-referendum political instability becomes obvious. One aspect of this is that although not all of the current crises are attributable to Brexit, many of them, including the interlinked ones of inflation, lack of growth and labour shortages, are at least partly connected to it. Truss will not be able to admit that, but nor will she be able to show it ‘improving lives, bolstering the economy or mending institutions’. Heath and other diehard Brexiters still don’t grasp it, and probably never will, but there is simply no way that Brexit can do any of those things. The problems and costs it has entailed already are not, as he has it, “implementation failures”, they’re what Brexit means in reality. Truss can’t tell them that, either.
The more fundamental issue is that this detachment from reality has now infected Tory politics more generally. So what defines post-Brexit politics is not just that the government can’t tell the truth about Brexit but that it can’t tell the truth about anything. Instead, just as with Brexit, all the bad news and forecasts of worse to come are dismissed as a new kind of Project Fear, as pessimism spread by ‘experts’ and the media. So even as they berate ‘remainers’ for failing to differentiate between Brexit and non-Brexit causes of the UK’s multiple problems, they themselves adopt an undifferentiated approach to those problems.
The unleadable in pursuit of the impossible
These three features of post-referendum political instability – the overwhelming of the institutions of the State and politics, the unleadability of the Tory party, and the inability to tell the truth – are obviously linked. They are linked in the impossibility of putting into practice the false and contradictory promises of Brexit. More generally, they are linked in the way that the Tory Party has reached a point where the things most of its members and many of its voters want are impossible.
Fundamentally, what they want are not just the impossible illusions of Brexit but a string of impossible illusions that go with it. These are at once less facile and more unattainable than blue passports and Imperial measures. They want a country that resembles an imagined past of stability, homogeneity and greatness. For all that they talk of love of country, they profoundly dislike the country as it actually is and want the government to provide them with another one, preferably located a long way from Europe, but it’s one which never existed and can’t be created now. Worse, the very policies it draws them to – most obviously Brexit – actually reduce such stability, homogeneity and greatness as exists.
They’re not completely crazy, and know the Empire has gone for good, but they still think in unrealistic terms about ‘the Anglosphere’ and the Commonwealth. They are now primarily an English party and, though they remain notionally pro-Union, they still think in unrealistic terms of it being one in which the non-English parts ‘know their place’. They want to visit stately homes without hearing about the realities of where the money came from to build them, and to enjoy a spell of hot weather without hearing about the realities of climate change. They want to be ‘free to say what we think’ without accepting the reality that others have the freedom to criticise what they say. Above all, they want a country of common sense and simple solutions and, though they aren’t unique in wanting that, they want it in a particular way, wherein complex reality is not just an irritant to them but a plot against them.
Brexit was a pivotal moment because it seemed to be a portal not just to leaving the EU, but to delivering all this and more. The ‘silent majority’ had finally spoken and been heard. But it has turned to ashes. Not only have none of the wider illusions been delivered (indeed many of them are further away than ever) but the reality of Brexit itself proved to be entirely different to what they thought it would be. That is why so few celebrate it, although they may still cling to the hope that the dream will eventually be realised. Meanwhile, they have simply added remainers and saboteurs to the long list of enemies within, along with ‘lefty lawyers’, the BBC, and the more amorphous ‘human rights brigade’, ‘metropolitan elite’, ‘Woke’ Establishment, and ‘the Blob’; and added Brexit betrayal to their long list of unassuageable grievances.
In that framing, Sunak is now depicted as ‘soft’ on Brexit, for apparently having urged some caution over the NIPB and extensive regulatory divergence when he was Chancellor. That’s linked to him being seen as captured by the ‘Treasury Blob’, and it’s notable that he has couched his (failing) message of ‘fiscal prudence’ in the terms that ‘you can’t have your cake and eat it’. The first shows just how hard line the party members have become on Brexit itself, whilst their rejection of what, to them, used to be unquestionable fiscal orthodoxy shows how deeply they have embraced the Johnsonian cakeism that Brexit was sold on.
By contrast, Truss has convinced them that she might make Brexit a success, and offers the ‘simplist’ prescription of tax cuts as a cure-all, whilst gleefully lashing out at the ‘enemies within’. Above all, she has not challenged the impossibility of their illusions in even the mildest of ways. Hence they favour her as their leader, although neither candidate is the Thatcher-Johnson-Farage amalgam they crave.
Ironically, if the Tories could find someone with the genuine leadership qualities that both the country and their party actually need, that person’s first task would be to tell them that what they want is undeliverable. In the absence of that, they will eventually denounce any leader as being – as they said of David Cameron, as well as of May and even of Johnson – ‘not a real Conservative’. And, indeed, who could be, for as long as a real Conservative leader means someone who will make the impossible become real?
What happens now?
None of this is entirely new within the Tory Party (anyone remember ‘the Monday Club’? Or, more obscurely, ‘Selsdon Man’?), but what is new is that there is now almost nothing else within the Tory Party, which also opens up a schism between the party itself and some parts of its core vote. How its hapless condition will play out in the long-term is difficult to know.
One possibility, especially as the economic crisis gets worse, is that it gathers force and becomes more vicious, gaining new recruits, and perhaps even forging links, if only informal, with the street-fighting hard Right. It’s not a very long walk from that to Ur-Fascism. More optimistically, it reflects a mainly ageing demographic which in the not-too-distant future will become a political irrelevance. Or perhaps – more likely in opposition than in government, and certainly not under Truss or Sunak, neither of whom has the vision or character needed to do it – the Tory Party will remake itself in the somewhat more pragmatic mould that has arguably characterised most of its history.
But for the immediate future, we can only expect the post-Brexit instability to continue. None of the things being discussed in the leadership contest remotely speaks to the scale of the country’s problems, or to the deep causes that most of them have. Certainly there is no recognition of the realities of Brexit, how these intersect with the other problems, or of the damage Brexit is doing to just about every sector even without those other problems. Still less is there any glimmer of recognition of how diminished the UK’s standing in the world is as a result of Brexit and of the politics it has brought in its wake, or how widely Truss is distrusted by many of the UK’s key allies.
One particularly serious economic consequence of this continuing instability is that, as has been the case ever since the Brexit vote, vitally needed business investment and foreign direct investment will continue to be much weaker than it would have been. This, as well as pressure on sterling, will be exacerbated if the row with the EU over the NIPB continues and worsens: just as in the years since the referendum, why invest when uncertainty hangs over the future terms of around half of the UK’s trade? The EU reaction to such a row, I assume, would be to ‘play it long’, partly because the continued uncertainty hurts the UK more than the EU, partly in the hope that this government only has two years to run.
An era ending?
Of course if the Tories not only get through the next two years but also contrive to win the next election then all bets are off, for the EU as for all of us. But to me it feels – and a feeling is all it can be until it happens, when it becomes truism – that something fundamental is shifting. It seems rather like the tail-end of the Wilson-Callaghan government of 1974-1979 or of the Major government of 1992-1997. In both cases there was a sense of not just the government but a political era dying, and I think it’s there again now.
There’s already some polling evidence for that shift, but much depends on the Labour Party being able to capitalise on it, including the extent to which they are willing to get real about the damage of Brexit. That’s possible, if only because it would reflect the settled, indeed growing, view of the general public that Brexit was a mistake. It’s also reported (£) that both right and left wings of the party are now pressuring Keir Starmer to take a “softer” Brexit position. More broadly, Labour will need to develop a convincing policy on the economic crisis in whatever form it exists by the time of the next election. Again, there are already some signs of that. What is still missing compared with 1979 or 1997, and much harder to create, is a wider narrative of a desirable and deliverable future, rather than just a crisis management plan.
What links the Brexit policy and the wider policies that Labour need is the requirement to meet the challenge that the Tory Party manifestly can’t: to break with the culture of fantasy and lies, the denial of, and active hostility to, reality. That is the poison that Brexit exemplified and bequeathed which has to be sucked out of the body politic. It won’t be at all easy given how widely it has spread and how deep the wells from which it draws, not least the bottomless one of the pro-Brexit media.
As to what happens in the meantime, about the best that can be hoped for is that not too much more damage is done under Truss. It could be considerable. But, precisely because the only certainty is continuing instability, it is perfectly possible that events may quickly unfold, and in ways very different from those that anyone expects.
This is intended as the last post before the election of the next PM, so unless something unexpected happens I won’t blog next Friday. After that, I’ll be on holiday for two weeks so will unfortunately miss the start of the new regime, and the next post will be on Friday 23 September.
Multiple crises with no functioning government
Domestically, that means a rapidly worsening cost of living crisis. Inflation is at its highest since the early 1980s and still rising, with households facing their largest ever recorded fall in living standards, and the Bank of England predicts five continuous quarters of economic recession. There are multiple strikes in the rail network, the docks, the courts, the postal service and elsewhere, and more to come. With a growing ‘Don’t Pay’ campaign in the face of what for many will be impossible energy bills, talk of civil unrest and disobedience does not seem hyperbolic.
There are now chronic labour shortages in almost every occupation, so that even as food prices rise to a 40-year high there is food rotting in fields for lack of people to pick or harvest it. The NHS, and especially the ambulance service, is at breaking point, as, not unrelatedly, is the social care system. In fact it is hard to find any part of the public or private sector which is not, in some way or other, under alarming strain. The beaches are awash with sewage, like a metaphor. And, though you’d hardly know it, we are still living with the effects of a pandemic, including an estimated 1.6 million people in England alone living with Long Covid, and presumably the possibility of a new wave to come.
Throughout all this, the leadership contest means there has been, in effect, no functioning government. The notional Prime Minister, rather than acting as a responsible caretaker, has spent the summer alternating between sulking, holidaying and squeezing the last drop out of the perks of his office. Any chance Boris Johnson had of a final period of dignity to set against the depraved conduct that led to his ejection has been squandered. Most Prime Ministers end up being judged less harshly by history than they are at the time of their departure; I strongly suspect that Johnson will be assessed even more critically in the future than he is now.
Post-Brexit political instability set to continue
When this strange summer ends, it will not herald the end of the period of political instability any more than the events and crises of the summer are peculiar to the season. This isn’t a holiday that has gone horribly wrong, it’s the latest instalment of a reality there is no taking a break from. That political instability began with the 2016 referendum. Having a new Prime Minister is not going to finish, but is a part of, this post-2016 story. I don’t mean that there were no political problems before, but that since then there has been a particular sort of instability and for particular reasons.
It’s not a coincidence that the new Prime Minister will be the fourth in the six years since the referendum, the same number as held office in the thirty-one years between 1979 and 2010. Nor is it a coincidence that within those six years there have also been two general elections, massive churn in the holding of ministerial posts, an illegal prorogation of parliament, a unique judgment that the government was in contempt of parliament, numerous highly unusual constitutional events, a government openly threatening to break international law, massive stresses in the relationship between Westminster and the devolved administrations, significant pressures on the Good Friday Belfast Agreement, and perhaps the most significant rifts between ministers and the civil service in modern history. All these things reflect the way that Brexit has all but overwhelmed the capacity and norms of the UK state and political institutions.
The unleadable Tory Party
Centrally implicated in all this is the ongoing convulsion of the governing Tory Party, a convulsion now so long-lived, dating as it does to the 1992 Maastricht Treaty battles, that it should be considered chronic. This isn’t the place to discuss all of that, so here I’ll just talk about the present leadership contest. The most likely winner, Liz Truss, was not the first choice of MPs, whilst 55% of the party membership think that those MPs were wrong to have ousted Johnson, a view echoed by Conservative voters and floating voters (£). This means that Truss, assuming she wins, will not be starting with a groundswell of support even from within her own party ranks. Amongst the general public, she scores negatively in views of her ability to handle the major issues (as do Sunak and Johnson). It’s unlikely that she will experience more than short-lived political ‘honeymoon’, if that.
One of the features of Tory MPs, especially since the referendum, is how undisciplined they are. So, particularly as she isn’t their own choice, Truss will find her backbenchers prone to revolt and that will be all the more so if, as rumoured, she packs the cabinet with those from the hard Brexit right wing, very possibly including preposterous blowhard David Frost, to the exclusion of ‘Red Wallers’ and ‘One Nationers’. There are even rumours that the peculiar Thatcherite has-been John Redwood will be disinterred, a word which in this case would be almost literally true. A more broad-based administration would just bring the backbench schisms into the cabinet. Already there is speculation that the weakness of her position amongst MPs will force her to call an early election, risky as that would be.
The Northern Ireland Protocol Bill (NIPB) could be an early flashpoint, if she pushes ahead with it as she has promised. Apart from facing opposition from Tories in the Lords, it’s at least possible that some of the Tory MPs who understand the damage it will do will find the courage to vote against it. If she doesn’t push ahead then, almost certainly, the ERG will mount an immediate attack. The same is true if, as some commentators speculate, she ditches the generally hard right line she has taken during the leadership contest and once more re-invents herself as some sort of consensual centrist. As much as, if not more than, her predecessors she will be constantly vulnerable to ERG extremism, whether on Brexit or other issues.
Even without that ever-present pressure, Truss is extremely ill-equipped to deal with the multiple crises she will face. She shows little sign of having the intellectual or interpersonal skills needed, and her sub-Johnson boosterism is not going to carry her very far in the present context. Attacking doomsters, gloomsters and ‘declinists’ may have some appeal to party members. To a country feeling distinctly gloomy, if not doomed, and visibly declining, its appeal will be very limited indeed.
It may be that, as many expect, and as Rees-Mogg and David Frost amongst others are urging, she will launch into a libertarian, deregulatory frenzy, delighting the Tory right by ‘delivering’ on what they meant by Brexit. If so, that is very unlikely to appeal to a country – including many Tory voters – that sees an urgent need not for deregulation but for, at the least, stronger and better regulation of utilities, in particular, as well as for a bigger and more interventionist State. If energy prices continue to rise as predicted then the political pressure for the latter will be irresistible. It’s also much more difficult in practice to deliver deregulation than to talk airily about making a ‘bonfire of EU regulations’, for the reasons I outlined in my previous post, the more so in the absence of any explicit political mandate or much administrative bandwidth to do so. Yet some right-wing Brexiters, such as Allister Heath (£), writing in loose-sphinctered terror of “ultra remainers mobilising to cancel it”, are convinced that “Truss is Brexit’s last hope” and rely on her to show that it can “improve lives, bolster the economy and fix broken institutions”.
It's here that a central feature of the rolling post-referendum political instability becomes obvious. One aspect of this is that although not all of the current crises are attributable to Brexit, many of them, including the interlinked ones of inflation, lack of growth and labour shortages, are at least partly connected to it. Truss will not be able to admit that, but nor will she be able to show it ‘improving lives, bolstering the economy or mending institutions’. Heath and other diehard Brexiters still don’t grasp it, and probably never will, but there is simply no way that Brexit can do any of those things. The problems and costs it has entailed already are not, as he has it, “implementation failures”, they’re what Brexit means in reality. Truss can’t tell them that, either.
The more fundamental issue is that this detachment from reality has now infected Tory politics more generally. So what defines post-Brexit politics is not just that the government can’t tell the truth about Brexit but that it can’t tell the truth about anything. Instead, just as with Brexit, all the bad news and forecasts of worse to come are dismissed as a new kind of Project Fear, as pessimism spread by ‘experts’ and the media. So even as they berate ‘remainers’ for failing to differentiate between Brexit and non-Brexit causes of the UK’s multiple problems, they themselves adopt an undifferentiated approach to those problems.
The unleadable in pursuit of the impossible
These three features of post-referendum political instability – the overwhelming of the institutions of the State and politics, the unleadability of the Tory party, and the inability to tell the truth – are obviously linked. They are linked in the impossibility of putting into practice the false and contradictory promises of Brexit. More generally, they are linked in the way that the Tory Party has reached a point where the things most of its members and many of its voters want are impossible.
Fundamentally, what they want are not just the impossible illusions of Brexit but a string of impossible illusions that go with it. These are at once less facile and more unattainable than blue passports and Imperial measures. They want a country that resembles an imagined past of stability, homogeneity and greatness. For all that they talk of love of country, they profoundly dislike the country as it actually is and want the government to provide them with another one, preferably located a long way from Europe, but it’s one which never existed and can’t be created now. Worse, the very policies it draws them to – most obviously Brexit – actually reduce such stability, homogeneity and greatness as exists.
They’re not completely crazy, and know the Empire has gone for good, but they still think in unrealistic terms about ‘the Anglosphere’ and the Commonwealth. They are now primarily an English party and, though they remain notionally pro-Union, they still think in unrealistic terms of it being one in which the non-English parts ‘know their place’. They want to visit stately homes without hearing about the realities of where the money came from to build them, and to enjoy a spell of hot weather without hearing about the realities of climate change. They want to be ‘free to say what we think’ without accepting the reality that others have the freedom to criticise what they say. Above all, they want a country of common sense and simple solutions and, though they aren’t unique in wanting that, they want it in a particular way, wherein complex reality is not just an irritant to them but a plot against them.
Brexit was a pivotal moment because it seemed to be a portal not just to leaving the EU, but to delivering all this and more. The ‘silent majority’ had finally spoken and been heard. But it has turned to ashes. Not only have none of the wider illusions been delivered (indeed many of them are further away than ever) but the reality of Brexit itself proved to be entirely different to what they thought it would be. That is why so few celebrate it, although they may still cling to the hope that the dream will eventually be realised. Meanwhile, they have simply added remainers and saboteurs to the long list of enemies within, along with ‘lefty lawyers’, the BBC, and the more amorphous ‘human rights brigade’, ‘metropolitan elite’, ‘Woke’ Establishment, and ‘the Blob’; and added Brexit betrayal to their long list of unassuageable grievances.
In that framing, Sunak is now depicted as ‘soft’ on Brexit, for apparently having urged some caution over the NIPB and extensive regulatory divergence when he was Chancellor. That’s linked to him being seen as captured by the ‘Treasury Blob’, and it’s notable that he has couched his (failing) message of ‘fiscal prudence’ in the terms that ‘you can’t have your cake and eat it’. The first shows just how hard line the party members have become on Brexit itself, whilst their rejection of what, to them, used to be unquestionable fiscal orthodoxy shows how deeply they have embraced the Johnsonian cakeism that Brexit was sold on.
By contrast, Truss has convinced them that she might make Brexit a success, and offers the ‘simplist’ prescription of tax cuts as a cure-all, whilst gleefully lashing out at the ‘enemies within’. Above all, she has not challenged the impossibility of their illusions in even the mildest of ways. Hence they favour her as their leader, although neither candidate is the Thatcher-Johnson-Farage amalgam they crave.
Ironically, if the Tories could find someone with the genuine leadership qualities that both the country and their party actually need, that person’s first task would be to tell them that what they want is undeliverable. In the absence of that, they will eventually denounce any leader as being – as they said of David Cameron, as well as of May and even of Johnson – ‘not a real Conservative’. And, indeed, who could be, for as long as a real Conservative leader means someone who will make the impossible become real?
What happens now?
None of this is entirely new within the Tory Party (anyone remember ‘the Monday Club’? Or, more obscurely, ‘Selsdon Man’?), but what is new is that there is now almost nothing else within the Tory Party, which also opens up a schism between the party itself and some parts of its core vote. How its hapless condition will play out in the long-term is difficult to know.
One possibility, especially as the economic crisis gets worse, is that it gathers force and becomes more vicious, gaining new recruits, and perhaps even forging links, if only informal, with the street-fighting hard Right. It’s not a very long walk from that to Ur-Fascism. More optimistically, it reflects a mainly ageing demographic which in the not-too-distant future will become a political irrelevance. Or perhaps – more likely in opposition than in government, and certainly not under Truss or Sunak, neither of whom has the vision or character needed to do it – the Tory Party will remake itself in the somewhat more pragmatic mould that has arguably characterised most of its history.
But for the immediate future, we can only expect the post-Brexit instability to continue. None of the things being discussed in the leadership contest remotely speaks to the scale of the country’s problems, or to the deep causes that most of them have. Certainly there is no recognition of the realities of Brexit, how these intersect with the other problems, or of the damage Brexit is doing to just about every sector even without those other problems. Still less is there any glimmer of recognition of how diminished the UK’s standing in the world is as a result of Brexit and of the politics it has brought in its wake, or how widely Truss is distrusted by many of the UK’s key allies.
One particularly serious economic consequence of this continuing instability is that, as has been the case ever since the Brexit vote, vitally needed business investment and foreign direct investment will continue to be much weaker than it would have been. This, as well as pressure on sterling, will be exacerbated if the row with the EU over the NIPB continues and worsens: just as in the years since the referendum, why invest when uncertainty hangs over the future terms of around half of the UK’s trade? The EU reaction to such a row, I assume, would be to ‘play it long’, partly because the continued uncertainty hurts the UK more than the EU, partly in the hope that this government only has two years to run.
An era ending?
Of course if the Tories not only get through the next two years but also contrive to win the next election then all bets are off, for the EU as for all of us. But to me it feels – and a feeling is all it can be until it happens, when it becomes truism – that something fundamental is shifting. It seems rather like the tail-end of the Wilson-Callaghan government of 1974-1979 or of the Major government of 1992-1997. In both cases there was a sense of not just the government but a political era dying, and I think it’s there again now.
There’s already some polling evidence for that shift, but much depends on the Labour Party being able to capitalise on it, including the extent to which they are willing to get real about the damage of Brexit. That’s possible, if only because it would reflect the settled, indeed growing, view of the general public that Brexit was a mistake. It’s also reported (£) that both right and left wings of the party are now pressuring Keir Starmer to take a “softer” Brexit position. More broadly, Labour will need to develop a convincing policy on the economic crisis in whatever form it exists by the time of the next election. Again, there are already some signs of that. What is still missing compared with 1979 or 1997, and much harder to create, is a wider narrative of a desirable and deliverable future, rather than just a crisis management plan.
What links the Brexit policy and the wider policies that Labour need is the requirement to meet the challenge that the Tory Party manifestly can’t: to break with the culture of fantasy and lies, the denial of, and active hostility to, reality. That is the poison that Brexit exemplified and bequeathed which has to be sucked out of the body politic. It won’t be at all easy given how widely it has spread and how deep the wells from which it draws, not least the bottomless one of the pro-Brexit media.
As to what happens in the meantime, about the best that can be hoped for is that not too much more damage is done under Truss. It could be considerable. But, precisely because the only certainty is continuing instability, it is perfectly possible that events may quickly unfold, and in ways very different from those that anyone expects.
This is intended as the last post before the election of the next PM, so unless something unexpected happens I won’t blog next Friday. After that, I’ll be on holiday for two weeks so will unfortunately miss the start of the new regime, and the next post will be on Friday 23 September.
Friday, 12 August 2022
What the leadership contest tells us about Brexit
Against the backdrop of a serious, growing, and multi-faceted economic crisis, the Tory leadership contest grinds on. The two contenders have little to say that matches the scale of this crisis and even less about Brexit, which is not only one of its components but the one most obviously unique to the UK. Nor do they speak of the immediate political problem Brexit will pose for whichever of them wins, namely the Northern Ireland Protocol Bill (NIPB). Yet, for all the silence, Brexit lurks beneath the contest; a ghost, a proxy, an indelible tattoo.
The leadership contest
One proxy is the candidates’ stoking of the anti-woke culture war. For the Brexit vote coded many things including the division between social liberals and social traditionalists and, in the mind of the Brexiters, those who ‘talk the country down’ and ‘those who love Britain’. Like much else about Brexit, this division wasn’t created in 2016 so much as given new zest and, despite existing in a different context, is a continuation of the decades-long whining about ‘political correctness’, the UK version of post-1960s backlash politics.
Indeed, there’s a dated feeling to the entire contest, especially in the constant invocations of Margaret Thatcher, perhaps reflecting the age and political reference points of the selectorate that will choose the next Prime Minister. It’s reminiscent of the way Conservatives still argue about whether Thatcher would or would not have supported Brexit, still vying for the imprimatur of the Iron Lady, or perhaps just for mummy’s approval. Equally, albeit again in a different context, the contest reveals the same contradiction of espousing free market, global free trade economics alongside social traditionalism and nationalism as that within Thatcherism. A similar contradiction, in fact, to that within the voting coalition of globalists and nativists that gave us Brexit.
Of course the many ways in which the context is different to the 1970s and 1980s only serve to reinforce the sense of a disconnect between this political discussion and current realities. The nature of the economic crisis is radically different. The geo-politics of the post-Cold War world are different. The politics of the Union are different. The now inescapable climate crisis is very different. Thoughtful Conservative commentators, such as Tim Pitt (£), warn that “cheap imitations of Thatcherism will not help the next prime minister tackle [these] formidable challenges”, but thoughtful Conservatism is long out of fashion, again in large part because of Brexit and its fallout.
It's not just that today’s issues are different to the 1970s and 80s. So too is political demography: in appealing to the ‘backlash generation’ the Tories have, apparently deliberately, chosen to set themselves against the young, the university-educated, and the urban. Yet, at the same time – and again it continues a trend that began under Thatcher but was spiced up by Brexit – contemporary Conservatives also despise the ‘traditional elites’ of the civil service, judiciary and business that used to form part of their heartlands.
All these groups, and more, are now disparaged in the new, omnipresent insult of ‘the Blob’ and its cognates ‘the remainer Blob’, ‘the Woke Blob’ (£) and ‘the Left Blob’, along with endless sub-variants like ‘the NHS Blob’ (£). It’s a terminology which, in the UK, is one of the many noxious legacies of Dominic Cummings who, when an advisor to the then Education Secretary Michael Gove, coined ‘the Education Blob’ as a term to disparage all those who actually knew anything about education. As such, it bears a family relationship to Gove’s notorious ‘we’ve had enough of experts’ line during the referendum campaign. It has now become a lazy catch-all term of abuse, as well as an excuse for governmental failures.
The (self-)importance of Frost
Woeful though they are, these terms of reference may well be adequate, and perhaps even unavoidable, in a contest pitched at the party membership, although it remains an open question whether they are a viable framing for the general election campaign that must come within two years. They certainly lack any discernible intellectual coherence or merit. But cometh the hour, cometh the man. A hero to many in the Tory Party, he is rumoured to be in line for a significant role if Liz Truss, the current favourite and his preferred candidate, wins. And he has stepped forward in a bid to provide just the coherence that is wanting.
Unfortunately, that man turns out to be David Frost who, with his habitual and limitless self-importance, this week published his Policy Exchange “essay” aspiring to exactly the big picture analysis that would enable the new leader to solve all the nation’s problems. Never one to understate anything, expect perhaps his own mediocrity, he boastfully presents this as an undertaking akin to the ‘Stepping Stones’ report that set a path for – yes, of course – the Thatcher administrations.
Apparently this is an effort that has been many years in the making but which his governmental duties had precluded writing. Now the truth can be told. Yet, for all the years of Frost’s tongue-between-teeth intellectual toil, it is, as the tagging of Thatcher prefigures, for the most part a reheat of her policies of lower taxes and a smaller state. If it differs from the intellectual pitch-rolling 1970s thinktanks undertook for Thatcher, it is mainly in lacking any kind of detailed prescriptions, relying instead on evergreen banalities such as calls to “reform our disgraceful prisons” or to “modernise the NHS”. On the newer challenge of climate change, the dangers of this constituting an ‘emergency’ are loftily dismissed as not being supported by the evidence.
What of Brexit?
One important implication of all this ‘back to Thatcher’ maundering is that almost nothing proposed here, or by the leadership candidates, actually requires Brexit. Indeed the first “pillar” of Frost’s proposals is that “the public must come to feel that we have taken a wrong path and to react against it”. But, hold on, isn’t that exactly what the public had been told, and responded to, in 2016? Wasn’t Brexit the new path? Must we now, just six years later and less than two years since the end of the transition period, embark on yet another new path?
The answer, it seems, is that “Brexit in itself creates neither huge economic advantage nor disadvantage”. Alas, this is not what leave voters were guaranteed in 2016. And puzzlingly, despite this apparent neutrality of Brexit, in the same paragraph Frost asserts that “leaving the EU has already hugely shaped our politics and political economy”. Indeed it is a “huge discontinuity” and yet, apparently, only the prelude to the next one, which will sustain the “Brexit Revolt”. The theme of revolt permeates the essay and presumably informs his grandiose choice of Lenin’s “What is to be done?” as the title of the prescriptive chapter, hard as it is to picture ‘the Rt Hon Lord Frost of Allenton CMG’ chugging wheezily up the steps of the Winter Palace.
In reality, this call to a new path is a tacit admission that Brexit has failed. Not only are there none of the huge advantages that had been promised, but Frost is forced to concede it has come with “some costs” which he downplays as not “material” and not amounting to the “disasters” predicted. This is the now boilerplate Brexiter position that forgets the promises of ‘sunny uplands’ in favour of the rather more modest definition of success being the avoidance of total disaster. Thus ‘Project Fear’ is supposedly discredited since the effects of Brexit haven’t been as bad as some of the Brexiters’ own hyperbolic renderings of the most extreme warnings, and it is taken as read that all the ‘Establishment’ forecasts have been discredited.
In fact, the Treasury long-term forecast of 2016 for the scenario of Brexit with a UK-EU trade deal, whereby after 15 years GDP is in the range of 4.6%-7.8% lower than it would otherwise have been, now looks as if it will be fairly accurate, with the latest NIESR projection being for 5%-6% lower over 15 years. Those are still projections, but they are consistent with actual performance so far, with the latest CER calculation suggesting that at the last quarter of 2021 GDP was between 4.9% and 5.2% lower than it would have been. By any normal meaning of the term that is, indeed, a huge, and ongoing, economic disadvantage. As for all the reports of other damages of Brexit across just about every sphere of life that have accrued, these are airily dismissed by Frost as “rarely justified by reality”. The running sore of the Northern Ireland Protocol that he negotiated gets even shorter shrift, as no more than an “issue” that “must be resolved”.
Brexit’s coy revolutionaries
The grudging recognition that Brexit has been an economic failure has been growing amongst the Thatcherite Brexiters for a year or so, and I discussed it in detail in a post last December. The proposition it leads to is one re-iterated by Frost. His suggestion is that the problem is the “psychological hangover” of EU membership, which means “the EU is still a reference point for too many issues and policies”. He means, in particular, that this has hampered deregulation and “supply-side reforms”. Yet Frost is very coy about giving any details. The same is true of Sunak and Truss, as well as numerous others, like Mark Sedwill (£) who this week trotted out yet another of the interminable articles in the pro-Brexit press about cutting EU red tape without specifying which rules would go.
So what are the ‘supply-side reforms’ that Frost and the leadership candidates envisage? It’s a loose term, and to talk as they do of deregulation and supply-side reforms is unhelpful as the latter term usually includes the former, alongside free trade and tax cuts. As regards tax cuts, such reform is often associated with the largely discredited ‘Laffer Curve’, which, in brief, suggests that, at least to a certain point, cutting taxes will increase tax revenues and also promote growth. This seems now to the be the basis of both Sunak’s and Truss’s tax plans (itself based, again, on a selective reading of Thatcher-era policies). But since, whatever its dubious virtues, such a policy could be pursued with or without Brexit, and given the particular flagging of the term, it’s obvious that deregulation is a central issue.
The mirage of deregulation
The vagueness about what this deregulation is to consist of is because of a number of inter-related reasons, all of which in different ways relate to the incoherence of the Brexit project. It might refer to regulatory divergence from the EU on things like product standards or data protection. The problem here is that, as the government has already found, such deregulation is unpopular with businesses because it reduces rather than extends the scope of their markets. Indeed that is hardly surprising – these shared regulations are the essence of the single market, and one of the reasons Thatcher herself was a single market enthusiast.
Moreover, in the current global economy, they are very often adopted well beyond the EU single market or, just as often, the EU standards themselves derive from other global bodies. For any one country, especially one that does half its trade with the EU and which is bound, by virtue of proximity, to continue to do a high volume of its trade with the EU, setting its own standards just doesn’t make economic sense. Nor is it compatible with the ‘free trade’ aspect of supply-side reform.
What has happened is that the latter-day Thatcher imitators have mistaken different kinds of regulation and deregulation. Some regulation, including that of the single market, is market-making. In those cases, deregulation reduces rather than extends the market. More than that, in the case of leaving the rules of the single market (and the customs union), it re-instates the regulation that otherwise exists. Hence Brexit has massively increased the ‘red tape’ (or regulatory) burden on trade with the EU even without any regulatory divergence (a common Brexiter myth is that having the same standards ought to mean trading as before, but it doesn’t absent of being part of the regulatory and legal eco-system of the single market: this was the myth that underpinned Liam Fox’s ‘easiest deal in history’ foolishness). Adding regulatory divergence to this will further increase, not decrease, those barriers to trade.
By contrast, some of the Thatcher-era deregulation was market-making. For example, changes to financial services law in the 1980s removed the restrictions on services that Building Societies could offer (e.g. cheque accounts and unsecured loans) so that they could compete with banks. The desirability of that, and other parts of 1980s financial services deregulation, can be debated, of course, but the present point is that this deregulation did indeed extend rather than reduce the market (more precisely, it re-regulated to do so). Thatcher’s Brexiter imitators, including Frost, Rees-Mogg, Sunak and Truss, have wrongly concluded that removing EU regulations from the UK statute book is akin to this kind of deregulation, when in fact it is the opposite. It’s more like getting rid of the laws that enabled building societies and banks to compete, and reverting to the barriers that previously existed so as to segment their markets.
The other aspect of this, and the reason for the coyness about specifics, is that many kinds of deregulation are likely to be highly unpopular not just with businesses but with voters once the implications are known. That applies not just to product and environmental standards but, perhaps even more, to reductions of employment and other rights if, as seems likely, this is the agenda that remains unspoken. Many voters, including many who supported Brexit, will not support that and, depending exactly what is envisaged, it could again militate against free trade aspirations, especially if it violated the level playing field clauses of the Trade and Cooperation Agreement.
There’s obviously nothing new about these ideas in British politics, nor about the idea that one significant strand of Brexiter motivation was to enact them. But it was only one strand, and as a result Brexit doesn’t give enough cover for it, reflecting the perennial Brexit problem that the 2016 vote was not a vote for any particular meaning of Brexit. Many parts of the leave-voting coalition would bitterly oppose this deregulatory agenda – not just some ‘Red Wall’ nationalist traditionalists but also some ‘Blue Wall’ One Nation liberals. Since this is the same coalition that supported Johnson in 2019, a government under either contestant would struggle to deliver it just as he did. Certainly, it is, at the very least, unclear that they could retain that coalition in a general election fought explicitly upon such a manifesto.
Two faces of Brexit
All of this serves to illustrate the misnomer of the subtitle of Frost’s ‘essay’, “Reality-based politics and sustaining the Brexit Revolt”. For the ‘Brexit Revolt’ was never a singular movement, and it only briefly maintained a coalition of diverse discontents by the denial of reality; by insisting that it was possible to ‘have our cake and eat it’, a cost-free Brexit and one which could deliver all of the contradictory promises made for it. Those false promises have already been exposed, not least in relation to Frost’s own bugbear, the Northern Ireland Protocol.
This means that Frost’s ‘third pillar’ for the future, a reclaimed national identity “to bed in the view irreversibly that leaving the EU was the necessary precursor to achieving this” has already failed. Brexit has already further divided the union, and it has bitterly divided the population at large. There is absolutely no recognition from Frost, or from any other Brexiter, of this, still less any responsibility taken for it. There is not the tiniest suggestion that he and they are to any degree at fault for what has happened. Instead, the idea is to push on even harder in the same direction, once again treating the 2016 referendum as a mandate for things never put to the electorate and yet, in a grotesque political spoonerism, claimed as a triumph of democracy.
These ongoing divisions of Brexit actually permeate the leadership election, despite Brexit not being mentioned much, and not in itself constituting a dividing line between the candidates. For one way to think about the Truss-Sunak contest is as being between treating Brexit as a kind of Year Zero, instigating a permanent revolution against established realities of economics, geography, law or convention, and a more orthodox, pragmatic pre-Brexit though pro-Brexit, Conservatism.
Despite how they themselves voted in the referendum Truss is firmly the candidate for the former camp, being almost Johnsonian in her relationship to truth, and Sunak represents the latter. It’s not surprising, and doesn’t bode well for Sunak’s chances given their smaller numbers, that whereas opinion polls suggest he narrowly leads (53-47) amongst Tory Party members who were remain voters, Truss massively leads (81-19) amongst those who voted leave (figures exclude don’t knows/ won’t votes).
Both are equally committed to Brexit, so that isn’t the point at issue. What is at issue is the contradiction between Brexit as a ‘reality-based’ policy agenda to be delivered by government and ‘Brexitism’ as a campaigning, insurgent mood of permanent ‘revolt’. Truss embodies that mood, albeit less vividly than Johnson, whereas Sunak’s belated efforts to do so appear uncomfortable and he is already being attacked (£) for his technocratic caution having ‘frustrated’ Brexit.
It’s a contradiction we’ve seen before. Theresa May treated Brexit as a policy to be enacted, and was destroyed by those who wanted the mood and the campaign, and didn’t like the reality at all. Johnson provided the mood and the campaign, but couldn’t enact the policy to the satisfaction of Brexiters. This wasn’t just about their individual failings, considerable as those were, it was about the impossibility of doing both.
The unavoidable impossibility of post-Brexit politics
So Frost’s call for “Reality-based politics and sustaining the Brexit Revolt” misses the fact that there is actually a choice: reality-based politics or sustaining the Brexit Revolt. A ‘revolt’ can’t also be a government. It also misses the fact that whichever of the two is chosen, it will not satisfy Brexiters for long. The ultimate cakeism of Brexit is their refusal to make that choice, the ultimate tragedy for the country is that winning the referendum forced it upon them. It’s that impossible dynamic which is still ongoing, lies silently at the heart of the current leadership campaign, and will persist whoever wins.
So if Truss wins, it won’t be long before the complaints start that she is lightweight, prone to empty gestures and u-turning under pressure, talks the talk of Brexit but doesn’t walk the walk. She certainly doesn’t have a strong track record of policy delivery. And it’s notable that although the original basis of her popularity with the party membership was her flashy announcements of ‘getting trade deals done’, providing them with at least the illusion of Brexit being delivered, the hard-core free marketers see the deals she has agreed with Australia and New Zealand as far too timid, and as having given in to UK producer interests (of course UK producers don’t see it that way, nor, apparently, does Sunak). She’ll have a go at the deregulatory fantasy, but nothing much will come of it for the same reasons as nothing much has come of it under Johnson. No doubt her one-time support for remain will be recalled. As time goes on, sustaining the revolt won’t be enough without providing the reality of what the Brexiters think is possible. A salesperson with nothing to sell. Johnson 2.0.
If Sunak wins, he may well make a serious attempt to enact Brexit: to make it a reality. He too will find himself ensnared in the illusions of deregulation but perhaps he will push on anyway, in which case the economic crisis will get worse. Perhaps he won’t, and will be lambasted by Brexiters for that. He may well, as Truss also promises, plaster his beloved freeports all over the country (though, given a conspiracy theory which seems to currently be gaining traction, it’s worth mentioning that there are no plans to create Charter Cities in the UK and that these are radically different to freeports on any normal meaning of either term). But still the Brexiters will say he has not delivered real Brexit, either in terms of the general economy, for freeports are not an economic panacea, or in terms of what many leavers thought they were voting for as regards secure and well-paid jobs and improved public services. No doubt his background as a globalist, ‘citizen of nowhere’ investment banker will be recalled. As time goes on, the reality will collide with revolt. Tarnished goods offered by someone with no sales skills. May 2.0.
These categorisations are probably overly stark, and in practice each of them will mix ‘reality’ and ‘revolt’ (as did May and Johnson) but still skewed in one or the other direction. But either will have to decide which way to go quite quickly on one key issue, because of the choices they will face over the NIPB. Again there is no solution here which will satisfy both the desire for perpetual revolt and the reality-based politics of economic and governmental rationality. That circle can only be squared by insisting that ‘the Blob’, rather than the government, is in charge, so they are still insurgents who, if they win, can deliver the promises of Brexit. It’s unclear, though, for how long an electorate facing multiple crises will support a government whose central message is its inability to govern.
The leadership contest
One proxy is the candidates’ stoking of the anti-woke culture war. For the Brexit vote coded many things including the division between social liberals and social traditionalists and, in the mind of the Brexiters, those who ‘talk the country down’ and ‘those who love Britain’. Like much else about Brexit, this division wasn’t created in 2016 so much as given new zest and, despite existing in a different context, is a continuation of the decades-long whining about ‘political correctness’, the UK version of post-1960s backlash politics.
Indeed, there’s a dated feeling to the entire contest, especially in the constant invocations of Margaret Thatcher, perhaps reflecting the age and political reference points of the selectorate that will choose the next Prime Minister. It’s reminiscent of the way Conservatives still argue about whether Thatcher would or would not have supported Brexit, still vying for the imprimatur of the Iron Lady, or perhaps just for mummy’s approval. Equally, albeit again in a different context, the contest reveals the same contradiction of espousing free market, global free trade economics alongside social traditionalism and nationalism as that within Thatcherism. A similar contradiction, in fact, to that within the voting coalition of globalists and nativists that gave us Brexit.
Of course the many ways in which the context is different to the 1970s and 1980s only serve to reinforce the sense of a disconnect between this political discussion and current realities. The nature of the economic crisis is radically different. The geo-politics of the post-Cold War world are different. The politics of the Union are different. The now inescapable climate crisis is very different. Thoughtful Conservative commentators, such as Tim Pitt (£), warn that “cheap imitations of Thatcherism will not help the next prime minister tackle [these] formidable challenges”, but thoughtful Conservatism is long out of fashion, again in large part because of Brexit and its fallout.
It's not just that today’s issues are different to the 1970s and 80s. So too is political demography: in appealing to the ‘backlash generation’ the Tories have, apparently deliberately, chosen to set themselves against the young, the university-educated, and the urban. Yet, at the same time – and again it continues a trend that began under Thatcher but was spiced up by Brexit – contemporary Conservatives also despise the ‘traditional elites’ of the civil service, judiciary and business that used to form part of their heartlands.
All these groups, and more, are now disparaged in the new, omnipresent insult of ‘the Blob’ and its cognates ‘the remainer Blob’, ‘the Woke Blob’ (£) and ‘the Left Blob’, along with endless sub-variants like ‘the NHS Blob’ (£). It’s a terminology which, in the UK, is one of the many noxious legacies of Dominic Cummings who, when an advisor to the then Education Secretary Michael Gove, coined ‘the Education Blob’ as a term to disparage all those who actually knew anything about education. As such, it bears a family relationship to Gove’s notorious ‘we’ve had enough of experts’ line during the referendum campaign. It has now become a lazy catch-all term of abuse, as well as an excuse for governmental failures.
The (self-)importance of Frost
Woeful though they are, these terms of reference may well be adequate, and perhaps even unavoidable, in a contest pitched at the party membership, although it remains an open question whether they are a viable framing for the general election campaign that must come within two years. They certainly lack any discernible intellectual coherence or merit. But cometh the hour, cometh the man. A hero to many in the Tory Party, he is rumoured to be in line for a significant role if Liz Truss, the current favourite and his preferred candidate, wins. And he has stepped forward in a bid to provide just the coherence that is wanting.
Unfortunately, that man turns out to be David Frost who, with his habitual and limitless self-importance, this week published his Policy Exchange “essay” aspiring to exactly the big picture analysis that would enable the new leader to solve all the nation’s problems. Never one to understate anything, expect perhaps his own mediocrity, he boastfully presents this as an undertaking akin to the ‘Stepping Stones’ report that set a path for – yes, of course – the Thatcher administrations.
Apparently this is an effort that has been many years in the making but which his governmental duties had precluded writing. Now the truth can be told. Yet, for all the years of Frost’s tongue-between-teeth intellectual toil, it is, as the tagging of Thatcher prefigures, for the most part a reheat of her policies of lower taxes and a smaller state. If it differs from the intellectual pitch-rolling 1970s thinktanks undertook for Thatcher, it is mainly in lacking any kind of detailed prescriptions, relying instead on evergreen banalities such as calls to “reform our disgraceful prisons” or to “modernise the NHS”. On the newer challenge of climate change, the dangers of this constituting an ‘emergency’ are loftily dismissed as not being supported by the evidence.
What of Brexit?
One important implication of all this ‘back to Thatcher’ maundering is that almost nothing proposed here, or by the leadership candidates, actually requires Brexit. Indeed the first “pillar” of Frost’s proposals is that “the public must come to feel that we have taken a wrong path and to react against it”. But, hold on, isn’t that exactly what the public had been told, and responded to, in 2016? Wasn’t Brexit the new path? Must we now, just six years later and less than two years since the end of the transition period, embark on yet another new path?
The answer, it seems, is that “Brexit in itself creates neither huge economic advantage nor disadvantage”. Alas, this is not what leave voters were guaranteed in 2016. And puzzlingly, despite this apparent neutrality of Brexit, in the same paragraph Frost asserts that “leaving the EU has already hugely shaped our politics and political economy”. Indeed it is a “huge discontinuity” and yet, apparently, only the prelude to the next one, which will sustain the “Brexit Revolt”. The theme of revolt permeates the essay and presumably informs his grandiose choice of Lenin’s “What is to be done?” as the title of the prescriptive chapter, hard as it is to picture ‘the Rt Hon Lord Frost of Allenton CMG’ chugging wheezily up the steps of the Winter Palace.
In reality, this call to a new path is a tacit admission that Brexit has failed. Not only are there none of the huge advantages that had been promised, but Frost is forced to concede it has come with “some costs” which he downplays as not “material” and not amounting to the “disasters” predicted. This is the now boilerplate Brexiter position that forgets the promises of ‘sunny uplands’ in favour of the rather more modest definition of success being the avoidance of total disaster. Thus ‘Project Fear’ is supposedly discredited since the effects of Brexit haven’t been as bad as some of the Brexiters’ own hyperbolic renderings of the most extreme warnings, and it is taken as read that all the ‘Establishment’ forecasts have been discredited.
In fact, the Treasury long-term forecast of 2016 for the scenario of Brexit with a UK-EU trade deal, whereby after 15 years GDP is in the range of 4.6%-7.8% lower than it would otherwise have been, now looks as if it will be fairly accurate, with the latest NIESR projection being for 5%-6% lower over 15 years. Those are still projections, but they are consistent with actual performance so far, with the latest CER calculation suggesting that at the last quarter of 2021 GDP was between 4.9% and 5.2% lower than it would have been. By any normal meaning of the term that is, indeed, a huge, and ongoing, economic disadvantage. As for all the reports of other damages of Brexit across just about every sphere of life that have accrued, these are airily dismissed by Frost as “rarely justified by reality”. The running sore of the Northern Ireland Protocol that he negotiated gets even shorter shrift, as no more than an “issue” that “must be resolved”.
Brexit’s coy revolutionaries
The grudging recognition that Brexit has been an economic failure has been growing amongst the Thatcherite Brexiters for a year or so, and I discussed it in detail in a post last December. The proposition it leads to is one re-iterated by Frost. His suggestion is that the problem is the “psychological hangover” of EU membership, which means “the EU is still a reference point for too many issues and policies”. He means, in particular, that this has hampered deregulation and “supply-side reforms”. Yet Frost is very coy about giving any details. The same is true of Sunak and Truss, as well as numerous others, like Mark Sedwill (£) who this week trotted out yet another of the interminable articles in the pro-Brexit press about cutting EU red tape without specifying which rules would go.
So what are the ‘supply-side reforms’ that Frost and the leadership candidates envisage? It’s a loose term, and to talk as they do of deregulation and supply-side reforms is unhelpful as the latter term usually includes the former, alongside free trade and tax cuts. As regards tax cuts, such reform is often associated with the largely discredited ‘Laffer Curve’, which, in brief, suggests that, at least to a certain point, cutting taxes will increase tax revenues and also promote growth. This seems now to the be the basis of both Sunak’s and Truss’s tax plans (itself based, again, on a selective reading of Thatcher-era policies). But since, whatever its dubious virtues, such a policy could be pursued with or without Brexit, and given the particular flagging of the term, it’s obvious that deregulation is a central issue.
The mirage of deregulation
The vagueness about what this deregulation is to consist of is because of a number of inter-related reasons, all of which in different ways relate to the incoherence of the Brexit project. It might refer to regulatory divergence from the EU on things like product standards or data protection. The problem here is that, as the government has already found, such deregulation is unpopular with businesses because it reduces rather than extends the scope of their markets. Indeed that is hardly surprising – these shared regulations are the essence of the single market, and one of the reasons Thatcher herself was a single market enthusiast.
Moreover, in the current global economy, they are very often adopted well beyond the EU single market or, just as often, the EU standards themselves derive from other global bodies. For any one country, especially one that does half its trade with the EU and which is bound, by virtue of proximity, to continue to do a high volume of its trade with the EU, setting its own standards just doesn’t make economic sense. Nor is it compatible with the ‘free trade’ aspect of supply-side reform.
What has happened is that the latter-day Thatcher imitators have mistaken different kinds of regulation and deregulation. Some regulation, including that of the single market, is market-making. In those cases, deregulation reduces rather than extends the market. More than that, in the case of leaving the rules of the single market (and the customs union), it re-instates the regulation that otherwise exists. Hence Brexit has massively increased the ‘red tape’ (or regulatory) burden on trade with the EU even without any regulatory divergence (a common Brexiter myth is that having the same standards ought to mean trading as before, but it doesn’t absent of being part of the regulatory and legal eco-system of the single market: this was the myth that underpinned Liam Fox’s ‘easiest deal in history’ foolishness). Adding regulatory divergence to this will further increase, not decrease, those barriers to trade.
By contrast, some of the Thatcher-era deregulation was market-making. For example, changes to financial services law in the 1980s removed the restrictions on services that Building Societies could offer (e.g. cheque accounts and unsecured loans) so that they could compete with banks. The desirability of that, and other parts of 1980s financial services deregulation, can be debated, of course, but the present point is that this deregulation did indeed extend rather than reduce the market (more precisely, it re-regulated to do so). Thatcher’s Brexiter imitators, including Frost, Rees-Mogg, Sunak and Truss, have wrongly concluded that removing EU regulations from the UK statute book is akin to this kind of deregulation, when in fact it is the opposite. It’s more like getting rid of the laws that enabled building societies and banks to compete, and reverting to the barriers that previously existed so as to segment their markets.
The other aspect of this, and the reason for the coyness about specifics, is that many kinds of deregulation are likely to be highly unpopular not just with businesses but with voters once the implications are known. That applies not just to product and environmental standards but, perhaps even more, to reductions of employment and other rights if, as seems likely, this is the agenda that remains unspoken. Many voters, including many who supported Brexit, will not support that and, depending exactly what is envisaged, it could again militate against free trade aspirations, especially if it violated the level playing field clauses of the Trade and Cooperation Agreement.
There’s obviously nothing new about these ideas in British politics, nor about the idea that one significant strand of Brexiter motivation was to enact them. But it was only one strand, and as a result Brexit doesn’t give enough cover for it, reflecting the perennial Brexit problem that the 2016 vote was not a vote for any particular meaning of Brexit. Many parts of the leave-voting coalition would bitterly oppose this deregulatory agenda – not just some ‘Red Wall’ nationalist traditionalists but also some ‘Blue Wall’ One Nation liberals. Since this is the same coalition that supported Johnson in 2019, a government under either contestant would struggle to deliver it just as he did. Certainly, it is, at the very least, unclear that they could retain that coalition in a general election fought explicitly upon such a manifesto.
Two faces of Brexit
All of this serves to illustrate the misnomer of the subtitle of Frost’s ‘essay’, “Reality-based politics and sustaining the Brexit Revolt”. For the ‘Brexit Revolt’ was never a singular movement, and it only briefly maintained a coalition of diverse discontents by the denial of reality; by insisting that it was possible to ‘have our cake and eat it’, a cost-free Brexit and one which could deliver all of the contradictory promises made for it. Those false promises have already been exposed, not least in relation to Frost’s own bugbear, the Northern Ireland Protocol.
This means that Frost’s ‘third pillar’ for the future, a reclaimed national identity “to bed in the view irreversibly that leaving the EU was the necessary precursor to achieving this” has already failed. Brexit has already further divided the union, and it has bitterly divided the population at large. There is absolutely no recognition from Frost, or from any other Brexiter, of this, still less any responsibility taken for it. There is not the tiniest suggestion that he and they are to any degree at fault for what has happened. Instead, the idea is to push on even harder in the same direction, once again treating the 2016 referendum as a mandate for things never put to the electorate and yet, in a grotesque political spoonerism, claimed as a triumph of democracy.
These ongoing divisions of Brexit actually permeate the leadership election, despite Brexit not being mentioned much, and not in itself constituting a dividing line between the candidates. For one way to think about the Truss-Sunak contest is as being between treating Brexit as a kind of Year Zero, instigating a permanent revolution against established realities of economics, geography, law or convention, and a more orthodox, pragmatic pre-Brexit though pro-Brexit, Conservatism.
Despite how they themselves voted in the referendum Truss is firmly the candidate for the former camp, being almost Johnsonian in her relationship to truth, and Sunak represents the latter. It’s not surprising, and doesn’t bode well for Sunak’s chances given their smaller numbers, that whereas opinion polls suggest he narrowly leads (53-47) amongst Tory Party members who were remain voters, Truss massively leads (81-19) amongst those who voted leave (figures exclude don’t knows/ won’t votes).
Both are equally committed to Brexit, so that isn’t the point at issue. What is at issue is the contradiction between Brexit as a ‘reality-based’ policy agenda to be delivered by government and ‘Brexitism’ as a campaigning, insurgent mood of permanent ‘revolt’. Truss embodies that mood, albeit less vividly than Johnson, whereas Sunak’s belated efforts to do so appear uncomfortable and he is already being attacked (£) for his technocratic caution having ‘frustrated’ Brexit.
It’s a contradiction we’ve seen before. Theresa May treated Brexit as a policy to be enacted, and was destroyed by those who wanted the mood and the campaign, and didn’t like the reality at all. Johnson provided the mood and the campaign, but couldn’t enact the policy to the satisfaction of Brexiters. This wasn’t just about their individual failings, considerable as those were, it was about the impossibility of doing both.
The unavoidable impossibility of post-Brexit politics
So Frost’s call for “Reality-based politics and sustaining the Brexit Revolt” misses the fact that there is actually a choice: reality-based politics or sustaining the Brexit Revolt. A ‘revolt’ can’t also be a government. It also misses the fact that whichever of the two is chosen, it will not satisfy Brexiters for long. The ultimate cakeism of Brexit is their refusal to make that choice, the ultimate tragedy for the country is that winning the referendum forced it upon them. It’s that impossible dynamic which is still ongoing, lies silently at the heart of the current leadership campaign, and will persist whoever wins.
So if Truss wins, it won’t be long before the complaints start that she is lightweight, prone to empty gestures and u-turning under pressure, talks the talk of Brexit but doesn’t walk the walk. She certainly doesn’t have a strong track record of policy delivery. And it’s notable that although the original basis of her popularity with the party membership was her flashy announcements of ‘getting trade deals done’, providing them with at least the illusion of Brexit being delivered, the hard-core free marketers see the deals she has agreed with Australia and New Zealand as far too timid, and as having given in to UK producer interests (of course UK producers don’t see it that way, nor, apparently, does Sunak). She’ll have a go at the deregulatory fantasy, but nothing much will come of it for the same reasons as nothing much has come of it under Johnson. No doubt her one-time support for remain will be recalled. As time goes on, sustaining the revolt won’t be enough without providing the reality of what the Brexiters think is possible. A salesperson with nothing to sell. Johnson 2.0.
If Sunak wins, he may well make a serious attempt to enact Brexit: to make it a reality. He too will find himself ensnared in the illusions of deregulation but perhaps he will push on anyway, in which case the economic crisis will get worse. Perhaps he won’t, and will be lambasted by Brexiters for that. He may well, as Truss also promises, plaster his beloved freeports all over the country (though, given a conspiracy theory which seems to currently be gaining traction, it’s worth mentioning that there are no plans to create Charter Cities in the UK and that these are radically different to freeports on any normal meaning of either term). But still the Brexiters will say he has not delivered real Brexit, either in terms of the general economy, for freeports are not an economic panacea, or in terms of what many leavers thought they were voting for as regards secure and well-paid jobs and improved public services. No doubt his background as a globalist, ‘citizen of nowhere’ investment banker will be recalled. As time goes on, the reality will collide with revolt. Tarnished goods offered by someone with no sales skills. May 2.0.
These categorisations are probably overly stark, and in practice each of them will mix ‘reality’ and ‘revolt’ (as did May and Johnson) but still skewed in one or the other direction. But either will have to decide which way to go quite quickly on one key issue, because of the choices they will face over the NIPB. Again there is no solution here which will satisfy both the desire for perpetual revolt and the reality-based politics of economic and governmental rationality. That circle can only be squared by insisting that ‘the Blob’, rather than the government, is in charge, so they are still insurgents who, if they win, can deliver the promises of Brexit. It’s unclear, though, for how long an electorate facing multiple crises will support a government whose central message is its inability to govern.
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