By Graham Vanbergen: It makes little difference whether the government wears a red badge, a blue badge or any other colour for that matter. Political ideology is all but dead. The markets confirmed that by killing off Truss and her version of Thatcherism. The result is that whoever is in power (for a long time to come) – economic decisions are guided by what markets have the stomach for. The result right now is that Rishi Sunak has neither the power or the time to make any significant changes other than calming markets.
Taxes are at their highest in 70 years and taxing the middle classes, their pensions, investments or otherwise is politically now a no-go area. Perhaps applying temporary windfall taxes to the energy companies and the banks will help in the short term. Labour would, quite rightly, have a go at corporate tax dodgers – but none of this will produce the types of long-term revenue required to engage in an ideology. Socialism, the type that Corbyn was proposing (that caused a swing to the political right), has never worked, nor has extreme neoliberal capitalism, trickle-down economics or even Brexit. The left and right wings of political ideology are now dead in the water.
It is because of these failed attempts that the state of the nation’s financial health is where it is. There is, effectively, no fiscal bandwidth left.
Whichever way you look at it though, economic growth is what really counts. If the economy stagnates, so do living standards. It really is that simple.
There are things that can be done to stimulate growth – but they all take time. ‘Trussonomics’ is the biggest indicator to politicians that the markets are now in control – because the tipping point in just every facet of borrowing or financial speculation has been reached. As said, there is no bandwidth.
Decarbonisation, innovation, trade, education and public health are all areas where we could see economic growth coming from – but a government destined to fail in the short-term will not invest for a long-term return.
Being a winner in the global race to Net Zero and pushing on with our strategic advantage in science and technology are fundamental to growth. Making the most of Brexit in a rapidly changing world will take years but must be focused upon if Britain is to become anything that resembles a trading powerhouse. Having a plan for Brexit might help! A technical revolution in education and public health will drive economic improvement, not just in the workplace but help to ‘level up’ regions.
Seizing these opportunities would make us more competitive, more dynamic and most importantly future-focused.
It was innovation and technology that drove the industrial revolution of 1760 to 1840. It brought about sweeping changes in economic and social organisation. But the reality of today is simple. Britain no longer has the technical advantages it had over its competition. But now Britain has another problem.
Rishi Sunak is now this month’s version of a Tory Prime Minister on the ideological right and the Tories have proved something – they now lack the judgement needed when it comes to making decisions in the best interests of our country. And Sunak has an enviable CV when it comes to misjudgements.
Sunak supported Cameron’s referendum that went on to crash the country into an economic wall in the guise of Brexit. He backed Boris Johnson who crashed himself into every wall possible. And in the midst of a deadly pandemic – Sunak subsidised people to dine out with no vaccine in sight causing a rapid incline in cases and no doubt many deaths with it.
Sunak has said nothing about what to do about Brexit – the one major economic policy that is holding this country back. Let’s be fair; politically he backed Johnson and worked next to him in a government that collapsed – twice. And just because Sunak understood the insanity of pushing unfunded tax cuts in a period of fiscal and current account deficits – with a looming recession, it is not proof of his ability to manage a country. After all, I predicted Brexit, the loss of several Tory PMs and a recession – it still doesn’t qualify me for an advisory seat at the top table in No10.
Rishi Sunak is in a government that has failed in everything it touches when it comes to the economy and general well-being of the country. Indeed, by many standards, everything is worse. And because everything is worse, investors are taking a dim view of the future prospects of the United Kingdom. This is another reason why there is less financial bandwidth – because everything is at breaking point. Our currency and bond markets are teetering on the edge of a cliff. A single miss-step and mayhem is triggered. But economic activity comes from having more than just good management of the economic machinery.
The NHS is not just in a crisis – it’s in an existential crisis. There are 7 million on waiting lists with 9 to 10 million expected by this time in 2024. Leading education organisations have written to the government warning of the “looming education funding crisis.” The leaders of 12 education bodies in England said school and college funding had been “cut to the bone over the past decade” and a real-terms cut in spending would be “catastrophic”. They are warning of reductions in teaching and support staff, larger class sizes, cuts to the curriculum and student support services.
Dr Mary Bousted, joint general secretary of the National Education Union (NEU), said “schools are already on their knees because they just don’t have the requisite funding to do the job that’s required. What’s going to happen is schools are going to have to narrow their timetable, narrow their range of subjects offer. We’re looking at a huge decline in things like design and technology, and creative subjects” In other words – to put in the words of the experts – “There is a very real risk of a decline in educational standards.”
Investors with a long-term horizon don’t look upon an unhealthy, uneducated population as the place where they can prosper – they go elsewhere. We have an ongoing housing crisis ( and what’s the point in government if they can’t even house their own people) and a social care crisis that is the ticking time bomb of the next two decades.
On top of all this, to distract the government from its duty of care to its own country – Putin’s attack on Ukraine continues to undermine the global economy and the fracturing of world geopolitics and international relationships.
All the while, Sunak is now in charge of a government in breakdown mode. Indeed, in many respects, Britain looks a lot like the political rot undermining America. This is a government that has wantonly and willfully attacked the institutions that support civil society. It has fully encouraged and engaged in a cynical culture war simply to gain votes and actively looked to divide the nation and its constituent parts.
The centre-right think tank Onward published results of its latest poll findings and found, even to their horror, a home truth. One-third of all voters said they would never vote for the Conservatives again in their lifetime. Another 50 per cent would probably not vote Tory again. And if ever there was one statistic that says it all, it is this – since 2019, the average age of a Tory voter has lept by 14 years. No one dare say this but in little more than a decade there will be more people aged 65 than 18 – and look at the damage these ageing voters have caused in the last ten years. Brexit is the root cause of political divisiveness and given the lack of rational argument for it – it was replaced by a cynical trashing of expert opinion in favour of an era long gone and delivered by those with no ethical or moral compass.
This profound degeneration of standards in public life has seen the Tory party not just become ungovernable – it has to all intents and purposes already imploded.
What the UK really needs is good people at the top with the national interest at heart. A banker that lit the touchpaper that crashed our financial system in the UK for personal gains, such as Sunak, should not be anywhere near the levers of power. This fact tells you everything you need to know about the system failure we are in right now.
Sunak is no statesman – yesterday’s wooden acceptance speech confirmed that. Sunak is no Lloyd George, Atlee or Thatcher and will be unable to control the many undisciplined factions within his own party. He has no real vision of what needs to be done for the future of Britain other than sidestepping economic traps.
It is very sad to witness and then have to admit – Britain continues its downwards spiral towards insignificance. A once great nation, proud of its achievements and place in the world – now on its knees to a few traders in the FX and bond market. We are a sliver of our former self – made so much worse in the last decade by the feral activities of self-serving liars and charlatans who promised sunlit uplands and delivered nothing but division and decay. Sunak cannot possibly overcome these systemic problems – that will take years of good governance, an ability the Tory party lost a long time ago.