Monday, 2 April 2018

The Conservatives' Prospectus is Plain Wrong

The UK’s Conservatives are probably feeling pretty chipper at the moment. They’ve managed to just about hold together during the process of leaving the European Union, a drawn-out crisis that has the potential to blow their party apart. The economy is still growing (and producing many, many more jobs than most thought possible). The main Opposition Labour Party is engaging in one of its tragi-comic periods of internal confusion and red-on-red civil war – while wearing a nasty-as racist face that many of its activists simply refuse to see. For the first time since the disastrous snap election of 2017, they are ahead in most of the polls. Theresa May’s rating as Prime Minister (above) just reached a new post-election high against the numbers plumping for Labour leader Jeremy Corbyn. Perhaps, Conservative activists might hope, things are finally on the up.

They are wrong if they think that they are emerging from their lack-of-comfort zone. Their lack of ideas is going to continue to hurt them all the way to next polling day. The economy looks unlikely to come to their aid. If nothing is done, public services are also going to seem threadbare indeed – a prelude to the party’s disastrous defeat in 1997. And most of all, their basic presumptions, and their backstop case to the electorate, is total nonsense. Let’s look in turn at some of their psychological furniture, and elements of their rhetoric, each bit of it as unimpressive in analytical power and descriptive force as the last.

The Brexit dividend. Let’s not rant on about Vote Leave’s notorious red bus any more, please. You know all about how misleading that was. But Ministers, including both the Prime Minister via omission and evasion – and the Foreign Secretary, in person – continue to encourage the damaging illusion of increasing public spending via the return of Britain’s EU membership fees. To which the only response possible is: are you joking? Where have you been for the last twenty-one months? Let us spell it out for you yet again: There. Will. Be. No. Brexit. Dividend. Slower growth will eat almost all of that money up, and then some. The whole idea of a Brexit dividend is a myth - just like many of the other old saws that the Leave team has always treated us to. 

We could even throw some numbers around, if you like. Foreign Secretary Boris Johnson has talked, in his usual pie-in-the-sky manner, about using Britain's now-unspent EU membership fees on increasing National Health Service funding by £5bn a year. The Office for Budget Responsibility has, again and again, pointed out how nonsensical that is, with up to £15bn per year going missing from the Treasury's coffers. If the UK were to leave the Customs Union and the Single Market - and it looks like it will leave many of the latter's functions - the cost could be very significant indeed. Even on the most recent and quite optimistic estimates of a good and solid free trade agreement with the EU, Whitehall might be £3bn-£4bn short of where it would have otherwise been every single year. So, yes, you can cut a quarter of the Transport budget, or get rid of unemployment benefit altogether, but get real. The real Brexit 'dividend' will be even more cuts than we're already likely to endure.

The repatriation of powers. The Leave campaign held out the promise of Britain controlling its borders; making its own laws; deciding its own destiny. Fair enough, in some ways. There is no doubt that membership of the EU means sharing sovereignty – inevitably giving up or merging some of it, in the hope of wider gains as everyone’s power is multiplied. But Brexit’s transition phase is going to take a great deal of the shine off this promise. Britain is pretty much going to remain in the EU until the end of 2020, with not much to show – on migration, spending, even fishing – for leaving. Except being excluded from the European Council and Parliament, where all the decisions are made. Even more seriously, life after the transition period won’t look like a clean break either. The Prime Minister is clear that Britain wants to participate in all sorts of institutions – from the EU’s aviation rules, via the Erasmus student exchange scheme, to the European Space Agency – that the country used to be a member of as of right. That’s going to cost the UK quite a bit of cold, hard cash.

Not only that: through the mechanism of a ‘deep and special’ trade partnership, Mrs May wants to recreate key elements of the Customs Union without actually calling them that and scaring the frightened Eurosceptical horses within her own party. That’s fine (and entirely rational): she’s proceeding, albeit very slowly and crabwise, to isolate the ultras within her own Cabinet, and on the backbenches, so she can seal a historic compromise. But the trade deals that Britain can then reach will be much paler things than they might once have been – kind of obviating the whole point of leaving at all. Once, the British strained to secure opt-outs: from the Social Chapter of the Maastricht Treaty, or the creation of the Euro. Now, they want a load of opt-ins, to rebuild a relationship they just throw on the floor, like a 1,000-piece jigsaw they’re now going to have to put back together in a wonky pastiche of the relationship they spoiled just a few months ago.

Falling immigration. There is no single term that explains Brexit more than the single word ‘immigration’. The relatively sudden entry of millions of Eastern Europeans into parts of the UK that had often not experienced much immigration just stretched the elastic of consent to the limit. So the Conservatives think that lower immigration will help them with those relatively low-income voters that often flocked to their banner in 2017, winning them some seats that had been Labour for generations. It’s likely that’ll succeed, to some extent. But it may do the Conservatives more harm than good overall. For there’s also little doubt that immigration helps the British economy, overall, to reach towards those growth rates that pay for public services. That if Britain isn’t careful, labour shortages will replace a relative glut of workers. And that growth will be held back as a result. It would of course be open to London, then, to issue more work permits and visas. Sovereign states all round the world take a view every year, or every few years, of what they want, and act accordingly. Will immigration go on falling, as it has over the past year or so? We wouldn’t bet on it.

Yet again voters will say: ‘Is that it? Is that what we voted Brexit for?’ In those circumstances, it should be little surprise that the British seem to have been warming a little towards immigration, as recent figures from Ipsos-Mori reveal (opens as PDF). This has the potential to get poisonous for the Conservatives’ new coalition of hard-up workers and richer, older people. They will get caught in a vice, between that bedrock of hardcore anti-immigration feeling they’ll have disappointed, and more mainstream voters if they start to get a case of the Bregrets.  If they see EU citizens making for the boats, voters will get very, very worried about the staffing of schools and hospitals, at the same time as they face up to higher prices for all sorts of goods and services (including food) that they have become accustomed to grabbing on the cheap. Keep in mind that a General Election electorate looks quite Remainer-y compared to that of the 2016 referendum: and that older Leave voters will have an inevitable tendency to exit that electorate as time goes by.

A growing economy. It looks like the economy is going to keep growing over the next few years. Not as quickly as it probably would have done without Brexit, it has to be said, and at a rate that would make a snail blush. There’s lots of reasons for that. British productivity increases, for one thing, are so embarrassingly bad that the word ‘embarrassing’ doesn’t do them justice. Brexit has caused something of a confidence blow to the system. British consumers are becoming very indebted again, and the UK’s service- and retail-based economy is probably straining against the best it can do. On the other hand, even Britain’s anaemic rate of growth should be enough to clear the deficit. At last. About six or seven years after the Conservatives first said that they could manage that feat. That will allow the Tories to get a bit more spending going in the public sector (we now already see the first signs that pay restraint is fading), and to promise more in the next Parliament.

But no-one’s going to feel this for a long, long time. The best projections we have for real wages is that they’re going to creep up,very slowly, only crawling past their 2007/2008 peak over the next year or two. Things are going to feel gritty, in the longest, slowest, most underpowered recovery we’ve experienced for perhaps two centuries. That’s going to hurt the Government. And at a time when record low interest rates and lots of savings in emerging economies might accelerate and attract more investment (in a country with an almost laughably child-like public transport system, for instance), the Government just is not doing nearly enough to head off such damage. It could force up what it calls the National Living Wage even more than it already has. It could allow cities and regions to borrow more. It could unleash the power of the housing market to buoy up its political fortunes, as Conservatives did in the 1930s, the 1950s and the 1980s. The present signs? They’ll do none of these things, but rather leave Britain on its current slow road to prosperity.

More opportunity all round. One key point Mrs May lasered in on during her early days in No. 10 was the plight of the so-called JAMs – those Just About Managing citizens who were working hard, perhaps at more than one job, but didn’t seem to be getting anywhere. They have enough to get by, but there’s absolutely no leeway at the end of the month. Just a little thing – a car bill, in policy terms a small interest rate rise – could tip these families into insolvency. There’s millions of these people, often disappointed that capitalism hasn’t granted them much actual capital, and there’s lots of them in swing marginals across the English North and Midlands. If the Tories could just reach them, went Nick Timothy’s reasoning while he remained as Mrs May’s key adviser, they’d sweep the board.

Well, yes – except that inequality is likely to get a lotworse over the next few years, after many years of stagnating, or even gently falling. That won’t do much for the JAMs’ sense that the world is fixed against them. Tax credit cuts, the egregious cruelties of Universal Credit and the like, and stagnating real wages, are unlikely to open up any opportunities for anybody - at a time when there is real suffering in parts of the country. What was the Conservatives’ answer? Grammar schools. A system that was ripped up in the 1960s because the ‘science’ behind selection at the age of eleven collapsed, and also because precisely these sorts of economically in-betweeny people revolted against them, when their children failed to gain entry. And not even a lot of grammar schools – just their extension where they already exist, and where the Conservatives, perhaps, are powerful enough to push them through. Given the party’s lack of a majority, even that’s now been kicked into the long grass. Some meritocracy.

No doubt the Conservatives are enjoying their little bump in the polls. Foreign policy, and in particular Russia’s reckless attack in Salisbury, has come to their aid – for now. The Leader of the Opposition is busy reminding voters about all those doubts they first had about him. When it comes to their own dirty laundry, Labour is bumbling around like a blindfold man in a sealed room. Inside a shipping container. On a boat that’s sunk. To the bottom of the Mariana Trench.

But zoom back from the day-to-day, and the Conservatives’ basic presumptions, and their direction, are wrong. Their crippling caution speaks to a dim low-on-thought twilight zone that desperately needs pepping up. But that’s hard to do while you’re governing: it's certainly very, very difficult indeed without a majority, and in the midst of Brexit. They have options. They could adopt a startlingly liberal appeal to a kind of new, surprising Toryism – modern, dynamic, fissiparous and liberating. Right now, Scottish Tory leader Ruth Davidson could probably win many, many more urban and suburban Labour seats than any other potential Conservative leader. Or they could grab hold of a working-class agenda that focused on fairness and opportunity, spreading wealth and power in all directions – as their MP for blue-collar Harlow, Robert Halfon, constantly urges them to do. Instead they’ll probably drift, hoping that Labour’s hand-to-hand fighting gifts them the next election. As we’ve seen, that’s a very dangerous presumption indeed.

You can break all that down into its constituent parts. The Conservatives apparently believe that Brexit will bring some money back into the Treasury’s coffers, and untie their hands to reform the economy. That is vanishingly unlikely. They think that falling immigration is going to continue to burnish their nativist credentials with ex-UKIP and ex-Labour voters. That may be true, but squeezing the numbers much more will be hard – at a time when the public seems to be thawing to the idea of people coming in anyway.

Tories seem to believe that the ‘free market’ is a thing of beauty, as well as a fact of nature. In a world economy increasingly likely to look nationalistic, protectionist and competitive, we sincerely doubt that shrinking the state even further – even the continuation of Britain’s slightly comic-opera status quo – will help anyone. At a time when the economy will be growing, but people may still be feeling both objectively poorer and as if they’re falling behind Britain’s elites – enormously fertile ground for Labour’s new and relatively populist cries. Last but not least, Mrs May’s rhetoric about an economy and a society that works for all looks very unlikely indeed to purchase on actually-existing reality. Britain’s Tories are lucky in the Opposition they face – for now. But their whole outlook is just fundamentally wrong. In no world does that not hurt them, and hurt them grievously.

Next time, we'll look in late April at what the local elections across England tell us about the state of the parties. Then, in May, 'Public Policy and the Past' will even-handedly take Labour's programme apart, since it's just as laughably threadbare as the nonsense the Tories have rolled out. See you there!