Beginning to See the Light: The end game 

 

‘Here comes two of you 

Which one will you chose? 

One is black and one is blue 

Don’t know just what to do, all right!’ 

 
Let’s be honest, after 12-yrs of Tory government we are in a mess 

All we hear is bloody Brexit when, actually, ‘it’s the economy, stupid!’ 

Inflation is at a 40-yr high, the Bank of England governor, Andrew Bailey, fears keeping prices under control, and further interest rates are imminent, adding fuel to the inflation fire. 

Economists at UBS Global Wealth Management believe 99% of British workers are getting worse off, their pay not keeping pace prices. 

By the end of August, the energy watchdog Ofgem will set its new price cap for fuel bills, which is expected to raise the yearly limit for the average household energy bill to £3,244, a 65% rise on the current cap, swallowing up the government’s planned energy grant of £400 in one meal. Rising energy prices will have a knock-on effect on food prices and the cost of other goods and services.  
 

Let’s be honest, after 12-yrs of Tory government we are in a mess

 
Whilst the BoE inhabits another world, warning of a wage-price spiral while wages are falling. Their  policy of raising interest rates will do nothing to impact supply-side inflation other than choking off demand in the UK, leading to stagflation. 

In Whitehall, ministers and the Treasury continue to offer only austerity and meagre pay rises that will have to be paid for by cutting public services. What we need is spending directed first at the poorest households in the UK, and then to offer public sectors a fair pay rise.  

Inflation aside, this isn’t a new problem. In December 2018 I penned a piece entitled ‘Hunting For Income In The Recession That Supposedly Never Happened‘; the summary posed the question, ’10-years on from a catastrophe has the world recovered? 

I concluded that whilst central banks saved the banking system, we had experienced a steady recession that had gone unnoticed, evidenced by the lack of wage growth for the majority of the population. 

Over 3-yrs on from that article the situation is little changed; in January this year a report by the TUC found that real weekly wages had fallen from £553 in 2008 to £550 in November 2021, based on calculations using the current consumer price inflation rate. (1) 

With hindsight the public, via austerity and falling real incomes, paid for the bail-out of the banks in 2008. 

The 2016 Brexit referendum, and the 2019 general election saw the public pushing back, as voters who felt ‘left behind,’ financially or because of progressive/inclusive politics, protested against the establishment.  

Populist politicians such as Farage bought a new meaning to the terms ‘establishment.’ Previously it was the monarchy, or those that act as the gatekeeper of public life through inherited wealth. Populists created a new establishment, the enemy; academics or experts, judges, in-short anyone who opposes them. 

Populism is Fascism by another name; Johnson was a typical populist leader;  charismatic, entertaining, but a man of straw. He promised a new way, but, as with all populists it worked in theory rather than in-practise. All we were left with was scapegoats offered up as a placebo for the governments shortcomings.  
 

‘two candidates toying to see who is the more Eurosceptic 7-years after the event, and trying to be the more authentic Thatcherite 30-yrs later’

 
Nothing changes, our two leadership hopefuls are by-products of Johnson’s premiership, promoted as a reward for their perceived loyalty and willingness to support his agenda. 

Populism is based on boastful promises that are often unattainable, giving it a limited shelf-life. There is only so long you can blame others for your own limitations.  

The Tory’s have used the country as an experiment for the niche ideology of its Eurosceptic right-wing. That will continue as the choice of our next PM is decided by party members, which is why we are left with two candidates toying to see who is the more Eurosceptic 7-years after the event, and trying to be the more authentic Thatcherite 30-yrs later. 

I use the term ‘trying’ because, whilst Sunak is an ersatz Thatcherite, Truss clearly doesn’t know what it means.  

Their attempts to impress have been reduced to unedifying televised debates where they tear shreds from each other, supported by their camps constant sniping. 

Sunak is more akin to 2019 conservatism, when Theresa May’s government was still trying to reconcile Brexit ideology with the demands of economic and diplomatic reality. Liz Truss appeals to the successor movement, the ‘Boris’ party, which resolved the tension by denying its existence. 

The only real difference between the two is that Truss wants immediate tax cuts, whilst Sunak wants to wait. Sunak believes that fiscal loosening will stoke inflation, Truss thinks it will create growth. He believes that these lost revenues will lead to less money for the NHS, which Truss plans to borrow. 

Sunak has the support of what is left of the old Tory party, by targeting Truss’s departure from prudence as a misguided promise that ‘we can have our cake and eat it‘, a favourite promise of   Johnson’s. 

Whilst the hopefuls scrap it out, those that constituted the ‘left-behind’ are in an even worse state due to the cost-of-living crisis. Whilst the situation is different this has the feel of 1979s ‘winter of discontent’ which ushered in a new broom with new policies. Out went Labour and wages and incomes policies, in came Thatcher and monetarism. 

It was as if we had pressed the reset button, which is exactly what is needed now. We have had 40-yrs of supposed Thatcherism, the last we thing we need is another ersatz version from someone such as Liz Truss who clearly doesn’t understand the subject. It takes more than a pussy-cat bow, Liz. 

Three of Thatcher’s former cabinet ministers have rubbished Truss’s ideas. Chris Patten, Norman Lamont and Malcolm Rifkind all said that the former Tory leader would not have supported the tax-cutting plans. 

Patten said: ‘Margaret Thatcher was a fiscal Conservative who did not cut tax until we had reduced inflation. She was honest and did not believe in nonsense.’ 

Norman Lamont, a senior Treasury minister under Thatcher, said: ‘Mrs Thatcher strongly believed that cutting the deficit came before cutting taxes. She also believed that deficits were simply deferred taxation.’  

Malcolm Rifkind said that he was as ‘certain as I can be that she would be very unimpressed by funding tax cuts through increased borrowing, even if it wasn’t at a time of high inflation – but certainly when it is‘ 

He continued, ‘She believed that tax cuts should be funded either by economic growth that was already producing more revenue, or by cuts in public spending. That’s what Thatcherism means. I think every single Tory, as well as lots of other people, believe in the desirability of tax cuts. But no Conservative would ever see it as an ideological imperative.’ 

Unfortunately, I fear Truss is the chosen one of the Johnsonites, Jacob Rees-Mogg and Nadine Dorries are her cheerleaders, along with the Johnson-backing media who are helping to destroy her competitors. She will be their next puppet, or one Tory MP said; ‘She is the adoptive child of the ERG [European Research Group] and all the other batshit groups on the right of the party.’  

The ascendency of the ERG has created a mood of hostility withing the party. Not just to Europe, but to facts which are replaced with ‘wishing.’ This explains why Truss is their chosen one, like them she believes that simply saying something is enough to make it happen. ‘You just have to close your eyes and wish really, really hard.’ 
 

‘she believes that simply saying something is enough to make it happen. ‘You just have to close your eyes and wish really, really hard’

 
An example of this is her claims to have ‘delivered’ a solution to the Northern Ireland protocol.  In truth all she had done is introduce legislation which, if passed, would break an international agreement and trigger a possible trade war with the EU. 

Her economic policy is based on fantasy, too. Just as ‘leave’ was built on the delusion that Britain could leave the worlds’ largest free-trade zone and become richer as a result. Brexit was endorsed by the likes of maverick economist Patrick Minford, and more on him, follows. 

Sunak may wish for a return to Tory basics of sound money, advocating Thatcherism, but Truss is the ‘apostle of the Thatcherite mood’ with her talk of upending the status quo, even if was created by successive Tory governments.  

When you dissect Truss’s record in government it is far from outstanding. As one her former cabinet colleagues said,  ‘She was never very good at anything she did.‘  

What Truss does excel in is being on the winning side. When she was seeking a parliamentary seat she was a Cameron ‘moderniser’. She was a Remainer in the 2016 referendum, describing membership of the single market as ‘precious‘. 

When Remain lost she saw the light, becoming a born-again Brexiter, ardently advocating the hard Brexit we are now enduring. 
 

‘She was never very good at anything she did.‘ 

 
She was appointed lord chancellor by Theresa May but lasted less than a year. Johnson appointed her international trade secretary which enabled her to sate her appetite for self-publicity, surrounding herself with union jacks, and hailing every deal she signed as a fantastic triumph for Brexit and herself, when most were rolled over agreements from when we were an EU member. 

And, who can forget her infamous speech at the Tory conference in which she ranted on about two-thirds of the cheese eaten in Britain being imported, she said,  ‘That. Is. A. Disgrace.’ 

Putting all of that to one-side will her ‘have cake and eat it’ approach deliver the economic stimulus we need? 

She believes so,trumpeting her planed £30bn stimulus, which includes reversing this year’s NIC increase, suspending green levies on power bills, and cancelling the 2023 rise in corporation tax. She is also offering a carer’s allowance, and increasing defence spending up to 3% of GDP, at a cost of £86bn, over the next 5-years. 

Like Thatcher, Truss wants to counter-balance looser government spending with tighter control on the money supply, believing that inflation is partly the result of cheap borrowing fostered by the central bank. Last weekend she said the government should ‘look again‘ at the Bank’s mandate ‘to make sure it is tough enough on inflation‘. In short, mortgages will go up, increasing inflation! 

Nick Macpherson, the former Treasury permanent secretary, described her tax-cutting proposals, as ‘less the heirs to Margaret Thatcher; more the disciples of Recep [Tayyip] Erdoğan‘. In June the inflation rate in Turkey where Erdogan is president, was 78.6%. 

Ben Nabarro, UK economist at Citi, said: ‘Liz Truss’ policy platform poses the greatest risk from an economic perspective with an unseemly combination of pro-cyclical tax cuts and institutional disruption.’ 

Robert Joyce of the Institute for Fiscal Studies thinktank warned that her £30bn worth of pledges would have implications beyond the tax system that remain unclear. But one thing is for sure: ‘they will mean higher borrowing or less public spending, or some combination’, so vast swathes of Whitehall and welfare spending will need to come under the hammer. ‘In the end, lower taxes do mean lower spending.’ 

Truss does have one economist in her corner, Patrick Minford, once an adviser to Margaret Thatcher. Patrick was the adviser who most strongly advocated the poll tax to Margaret Thatcher. The one whereby a duke paid the same flat-rate local tax as a dustman, and which caused her downfall. His opinions on the financial benefits of Brexit aren’t much better 

Patrick said Brexit would create 6.8% growth, worth £135bn. Whereas, to date, the Office for Budget Responsibility has estimated a 4% drop in UK growth, which the FT calculates as £40bn in lost tax revenue every year owing to Johnson’s hard deal. Just over half the electorate now think leaving the EU was a mistake.   

He told us that abolishing all tariffs, would cut 20% off food prices, while throwing Britain open to world free trade’s cheapest goods. In addition, removing all regulatory barriers would cut another 20% off prices.  

He dismissed the impact on UK farmers, saying that big farmers will switch to biotech and GM, and inefficient small ones will go to the wall. 

Saving the best to last, he said that it didn’t matter if manufacturing was killed by off by cheap imports as it would mean a ‘reallocation of labour.’ 
 

‘I am so bored with this leadership race of the hopeless which will be decided by 160,000 older, right-wing, predominantly white men’

 
This is a repeat of his supposed ‘reallocations’ he proposed under Thatcher in the 1980s that led to the ‘left behind’ communities in the first instance, and we are still paying the price for that. 

In truth, I am so bored with this leadership race of the hopeless which will be decided by 160,000 older, right-wing, predominantly white men. Whoever wins, even if it is Sunak, will be trying to implement a Thatcherism that never existed. 

We need strong, strategic and pragmatic government, not the psychodramas, repetitions and nostalgia of a Tory party beyond its sell-by date, delivering their version of Thatcherism on autopilot. 

I will leave the last word to Labour’s Sam Tarry, MP for Ilford South: 

‘It can’t be accepted any more that people just have to accept inflation is out of control. The government is doing nothing on the cost of living crisis, and I tell you what’s shameful – I believe strongly that if we had a Labour government right now, this dispute wouldn’t be happening because we would actually be around the table.’ 

‘You see, there’s nothing that’s behind me 

I’m already a has-been, uh 

Because my future ain’t what it was 

Well, I think I know the words that I mean‘

Notes: 

1. https://www.newstatesman.com/chart-of-the-day/2022/01/uk-wages-fall-back-below-2008-level 

 
 
It’s difficult not to feels more than a little downbeat after reading Philip’s latest column; in one way it is the end of an era that he has long wanted to see the back of, and rightly predicted.

However it feels as though there’s more than a hint of Blackadder’s ‘fate worse than a fate worse than death’; what on earth were those ‘debates’ about?

Two key members of government beating seven bells out of each other for the failure of, er, their government; Rishi mansplaining about the folly of early tax cuts before executing a handbrake turn on VAT.

We learned that the junior Sunaks are on charge of tackling climate change and that Ms Truss was a ‘teenage eco-warrior’ before it was fashionable (sic). WTAF.

If Boris provided a rich pipeline of compelling content for the column, what on earth can we expect from either of these herberts? When ambition extends way beyond competence, it promises a bumpy ride – particularly as the backdrop includes a heady combination of war, rampant inflation, rocketing energy costs and industrial unrest.

Philip’s column neatly defines Hobson’s Choice; what was he thinking?

‘I am so bored by the hopeless battling out to be the next Johnson.

Smug Rishi is criticised for his clothes. And rightly so. With his money he shouldn’t be using some Bloomsbury tailor, it should be Anderson & Sheppard, far more expensive. As for Prada trainers, please! It’s Hermes, twice the price!

Then there is Liz the leader, £4.50 earrings and a comp in Leeds. Oh dear…

But don’t worry, both are hard-right, and the great giveaway starts soon. It’s bog-off in Downing St. Both are going to duff up China and Russia, but the real enemy is immigrants who will be carted off to Rwanda en masse. Wasn’t Rishi’s family an immigrant? Yes, but he shops at Prada, which makes it acceptable.

Smug Rishi is closer to Thatcherism than Liz the leader, who, from what she says appears to have missed it.

What is clear is that this whole mess has been 12-yrs in the making. As I wrote in 2018 you can’t have an event like the GFC without a recession. As I wrote recently, our recovery was “L” shaped, now we are heading for the inevitable recession and stagflation.

The current Tory’s don’t get Thatcherism, it was sound money, fiscal prudence, the big income tax cuts didn’t happen until 1988, 9-yrs into her reign. Even then it was balanced by previous increases in VAT. Direct versus in-direct taxation.

Cutting taxes, indirect or direct, benefits the “haves” more than the “have nots”, therefore it will do little for those most in-need.

In a few weeks’ time we will have a new PM, everything else will remain the same. A shit-show.

We finish with the Buzzcocks and “Boredom”. What else is there?

@coldwarsteve
 

 
Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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