In the Seventies, a Middle Eastern war precipitated a global energy shock and stagflation, and a US president invoked populist pleas to the silent majority against the counterculture. As the gold standard and the post-war Bretton Woods system teetered on the brink of collapse, the monetarist economist Milton Friedman observed that “only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
Today we have a surplus of crises but a deficit of ideas lying around. There has been no significant wage growth in the UK for more than a decade. Productivity has flatlined. The political convulsions of Scottish separatism, Corbynism and Brexit have rocked established politics. The economy has been battered by the quick succession of a global pandemic and proliferating geopolitical tremors. Trust in the political class has never been lower, as Westminster’s elites flounder around looking for the levers that say “activate new growth model”.
Against all this, Rachel Reeves’s Budget will offer up the kind of Fabian reforms one might expect from a former Bank of England bureaucrat: public accounting tweaks that alter the measures of public assets versus liabilities on the balance sheet, which should free up significantly more capital for an investment-starved public realm. After a long period in which the UK has seriously neglected its fixed assets and capital stock, an overdue focus on restorative projects with broad multipliers, in energy, transport and housing, could help nudge growth upwards.
The question is whether Labour’s incrementalism and promises of delayed gratification will satisfy a restless public. “Fixing the foundations” is hardly an alluring slogan when those economic foundations are functionally imperceptible to most people. The tangibility and immediacy of an increase in the bus fare cap will surely have more cut-through than broad-brush promises of “a decade of renewal”, especially when the British public has stopped listening to much of what politicians have to say anyway. Reeves seems intent on burning through piles of goodwill and political capital to pursue negligible cost savings.
Perhaps Labour’s biggest problem is the lack of a coherent narrative thread that binds its policy choices together. It won the election by successfully appearing as the inoffensive, default option against incumbents who were visibly wearied by 14 years in power. But there was no ideological bedrock underlying their campaign. There have been only vague nods towards a post-neoliberal “securonomics”, edging towards a more interventionist, activist state encapsulated by GB Energy, the National Wealth Fund, and the New Deal for Workers.
This series of scattered and languid proposals do not make up the kind of paradigm shift that would be required to trigger a genuine reindustrialisation of left-behind Britain, or a spurt of rapid, sustained growth via the energy transition — the preferred route of the so-called “modern-supply-side” advocates in Labour-aligned think tanks. It all looks rather like a reheated Johnsonism, condemned by the Right at the time as “neo-Brownite social-democracy” and “green paternalism”.
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SubscribeReindustrialisation needs one thing that is not on the menu at the moment. Cheap energy. Unless our energy costs are competitive with China’s, we’re toast.
Indeed. Cheap energy is the bedrock of everything. Nothing can function without energy, and yet all the current policies are set to send energy prices into the stratosphere, for it turns out “renewables” aren’t free after all.
They are busy crippling the country to ensure it will never be able get back up off its knees. Toast we are.
Lightly done toast, obviously – the energy requirements of anything approaching brown and likely to melt your butter would be far too expensive
Totally agree. Instead we have ‘the saviour of the planet’, Ed Milliband, tear-arsing around and doing the exact opposite! The quicker that we lurch towards the lie that is ‘net zero’, the sooner we will be bankrupt. Cheap and, just as important, reliable energy is the only way we will be able to compete on the world stage.
We need Wealth Creation, not even more Administrators, and Managers of Administrators, distributing the ever decreasing Wealth to more and more Wealth Sinks, and Victims, and Enemies.
Don’t be surprised: it’s what Socialists do.
I’m amazed at how lazily journos throw around references to ‘culture wars’ as if it’s nothing.
It is everything. If you can’t define the simple. If you can’t protect the vulnerable. If you can’t police adequately. How the %#$& are you going to fix economies and deal with complex geopolitics?!
This version of Labour is a farce. A leader so clearly out of his depth he makes Johnson look good. And that’s really depressing.
And the way that the minimum wage keeps increasing and wages outside of that continue stagnate, we will all find ourselves on the minimum wage by the end of this government’s term. And Starmer will have his socialist utopia. Joy!
Is it though? Or is it precisely that meme where an oligarch orders someone to ‘introduce the people to identity politics’, after seeing the Occupy Wall Street protests outside?
In other words, a distraction from the underlying issue.
And Reeves seemingly lies on her CV about her experience as an “economist” sand about being a chess champion
https://order-order.com/2024/10/24/rachel-reeves-bank-economist-myth-busted/
https://order-order.com/2024/10/15/investigation-rachel-reeves-british-chess-champion-myth-busted/
I think she lied about being chancellor of the exchequer, too.
There isn’t a “deficit of ideas around”. There’s a deficit of politicians who can understand – and will also commit – to those ideas.
There are too many Arts and Humanities graduates in the political bubble. They have no idea what industry needs to flourish. But we can’t have that, anyway, as it will make the society unequal!
They are clueless, and so are their advisors. And who chose them? 🙂
In 1947, Hugh Dalton had to resign as Chancellor of the Exchequer because minutes before delivering his Budget speech, he had let slip to a journalist that certain taxes would be changed, causing that story to appear in the evening papers while he was still speaking and before he had informed the House of Commons. These days, readers and MPs alike would count themselves lucky that it had been true, since not only has the Government already announced five new freeports to the media, but those turn out never to have existed at all.
On Monday, Keir Starmer’s harsh light of fiscal reality bent around the £22 billion black hole of Rachel Reeves to reveal an extra £1.4 billion for schools, or a whopping 50 grand each; £500 million for social housing, enough to build a couple of thousand homes; £240 million to help people back into work, or about 80 quid for each person currently jobless; and a 50 per cent increase in bus fares.
All on the day that Sir Lindsay Hoyle read the riot act over the announcement of policy in the media before its announcement to the House. Today, he should name both Starmer and Rachel Reeves, requiring them to leave the House immediately and not return for the remainder of the day’s sitting. No Prime Minister’s Questions that day. And no Budget speech, effectively daring the Government to publish it anyway and see what would happen.
The national minimum wage goes back to 1998. It has increased since then, but by nothing like the increase in economic output per hour worked in the United Kingdom; in short, productivity. This is underpayment on a colossal scale, and underpayment is theft.
When the minimum wage goes up by 77p per hour, then 15.4p will be deducted from that in income tax, and 6.16p in employee’s National Insurance contributions. There will be a tapered deduction of up to 55 per cent in Universal Credit, and a fiscal drag of 2.5p due to the freezing of the Personal Allowance. So a full-time worker on minimum wage will keep fully 22 of those 77 pennies. £1.76 per day.
But wait. Her bus fare will be going up by two pounds per day, one pound to get her to work and one pound to get her home, leaving her 24p per day worse off even before things like the huge increase in energy costs, all under a Labour Government that had inherited an economy that had grown by £29 billion in the first six months of 2024, after which growth in Gross Domestic Product has simply ceased.
Meanwhile the value of your house will probably increase by £1000 pw this year. That’s where the wealth has gone. If Labour do not today make any attempt to remedy that then they don’t deserve to survive in government until Christmas, let alone until 2029.
Don’t worry the gain will also be taxed to the hilt, especially when you leave the house to your children.
Of course there are other ideas lying around but they are ignored or ridiculed because the status quo managed to stay in power. Even after 2008 when they should have lost credibility. The “There Is No Alternative” doctrine remains strong.
But you have take the risk and listen to the people with completely different ideas. This is something we can learn from Thatcher and people like her. The ‘proto-neoliberal’ Chicago and Austrian school economists were seen as strange fringe reactionaries but because of vocal and powerful advocates they gained mainstream acceptance.
Thatcher also knew her enemies. Once in power she attacked the powerful unions head on. Today I think the equivalent of unreasonable unions are the manegerial and financial industries. They are the big beneficiaries of the neoliberal welfare state. They were always protected against market discipline. Since 2008, every time something happens central banks and governments print money right into their assets. Not only is this precisely what makes the stagnation much worse, this rent seeking class will naturally also fight to protect their position.
It goes beyond ideas. It’s bravery. Our politicians are cowardly.
Our populous is equally cowardly, politicians are just the hat we are wearing on any given occasion
From the RSA website:
I’d argue that the NHS is one such organisation, that machine politics is another set of examples, and the two main political parties are currently intensely focused inwardly on internal struggles.
As a consequence our politicians have no interests in ‘vision’ or ‘goals’ beyond providing ‘status points’ in their party struggles. The views of the electorate are an embarrassing distraction from the ‘real business’ of politics.
It’s disappointing how impoverished the debate over taxes and benefits is. There are some points which, whatever one’s position on them, really need to be a well-understood part of the public discourse.
There are three main reasons for levying taxes. (1) To raise the revenues needed to run the state’s functions and services; (2) to redistribute wealth from people who are well off to people who aren’t; (3) to penalise and discourage unwanted behaviour. Is it really impossible for a Chancellor to state which taxes, current or proposed, fall into which category?
There are two main ways of distributing benefits. (1) As of right, universally, or on the basis of universal criteria such as age; (2) to selected recipients. This has been true ever since the introduction of benefits, no later than Lloyd George’s Old Age Pension in 1909. The pros and cons of each method are rediscovered by every chancellor as if they were entirely novel. Had they really not thought about them beforehand, and come prepared to articulate their chosen position?
I’m puzzled why a freelance writer and journalist commenting on UK politics feels the need to use a pseudonym.
There’s no need of course, until you step on someone’s toes and they send the Police around to discuss ‘hurty words’. Another example of ‘soft censorship’ maybe?
Maybe because it’s not a very good article?
agree
“We now lack the hegemonic infrastructure, the will, the capacities, and the political imagination to define a project that would contradict the whims of a faceless disciplining agent we call the bond markets.” This is only the case because the UK has run a persistent current account deficit since 1997 and because the UK does not have the export sectors that would benefit were there to be a run on the pound.
“The noises from the Conservative leadership contest signal little more than a desire to relitigate culture wars and restate commitments to a deregulatory agenda and small-state, low-tax principle”
Well that’s largely what I want. Much more, of course, but, although I think Jenrick is mostly noise, Badenoch is more. Much much more. And is the only person I can see in UK politics today with the gumption to fundamentally change things for the better.
She may have the gumption, but does she have the strength ?
I kept hoping that if I continued to read this dross that it would get somewhere, but it didn’t.
The inconsistencies and the half-baked misunderstandings didn’t reveal any basic actual insight.