by Jonathan Todd
The turbulence around Labour conference was much more than the Mersey wind. Sterling hitting an all-time low versus the dollar. 900 mortgage deals pulled by banks and building societies. Criticism of last Friday’s “mini budget” from the IMF.
The collapse in sterling means rising inflation, higher interest rates, and more pain for already suffering households. Government capacity to ameliorate this is limited by higher borrowing costs than Greece and Italy.
Dramatic changes in the UK’s economic fortunes are often driven by global events. It was OPEC and the oil price in the 1970s. American subprime mortgages and collateralised debt obligations in the 2000s. It takes a special kind of budget to crash the economy outside of global events – such as Nigel Lawson’s tax cuts in 1988 that overheated the economy and precipitated the 1990s recession.
The Tories will try to blame our economic problems on global events (Covid-19 and Putin’s war in Ukraine). “Global financial markets,” said the Treasury’s statement in response to new purchases of government debt by the Bank of England, “have seen significant volatility in recent days.” That the Bank of England acted after the “mini budget” reveals blame much closer to home.
“Panics do not destroy capital,” according to John Stuart Mill, “they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”
Much painful reassessment of past decisions abounds us. Is our household now in negative equity? Can our businesses afford supplies in a devalued currency?
The David McWilliams podcast recently quoted this Mill line and days prior to the “mini budget” McWilliams tweeted: “How long before the UK has a full blown bond crisis? Christmas?”
The “mini budget” was an early present, a lump of coal for all. McWilliams did not know anything that Treasury officials did not. The “mini budget” – with its £45bn of unfunded tax cuts – required warnings from officials to be ignored by Liz Truss and Kwasi Kwarteng.
This country has had enough of experts – Kwarteng’s Treasury has no space for Tom Scholar. It has had enough of the IMF – it has gone woke, with its bleating about inequality. It has had enough of economists – failing to see the growth magic contained in the “mini budget”.
These Tory ravings give a Jonestown massacre vibe to their conference. A cult untroubled by reality, determined to march forward. Straight off a cliff. With our money in their pockets.
Belief sustains both Labour and Tories. A happy, unified tribe in Liverpool that believes it can win versus the dark beliefs of destructive lemmings descending on Birmingham.
Jurgen Klopp spoke of a transition from doubters to believers when he became Liverpool manager. Players and fans – like MPs and activists – had to believe that the greatest prizes were achievable if they were to make the necessary sacrifices. Long sessions on tactics, fitness and strength being the footballing parallels to political message discipline, mastery of modern campaigning techniques, and #Labourdoorstep.
Labour leaves Liverpool with a greater appetite for these endeavours than we have enjoyed for years. Activists close their eyes and see Keir Starmer on Downing Street. Voters increasingly do too.
A Tory interloper to Liverpool, however, cautioned against getting ahead of ourselves. There was, he detected, a sense of Neil – “we’re alright” – Kinnock about some fringes. Perhaps Kinnock would have been alright against someone more drunk on Thatcherite Kool-Aid than John Major – a reassuring presence after Thatcher’s extremes, such as the 1988 budget. Truss is not equivalently emollient.
Labour, nonetheless, cannot depend on Conservative weakness. We need to build support and enthusiasm for Labour’s offer. A fairer, greener future that mirrors what President Biden is delivering in America: controlling inflation and creating good jobs through green investment, investing in tomorrow with childcare and student debt relief, using the power of the central state to build an economy from the bottom up and the middle out – not through discredited trickle-down economics, disastrously reheated by the “mini-budget”.
Alignment with the New Democrats helped make New Labour ascendent in the 1990s. Starmer, too, can rise with Biden.
The wind blowing off the Mersey came from across the Atlantic. It is a global wave of change. That will blow away the Truss government.
Jonathan Todd is Deputy Editor of Labour Uncut
Tags: David McWilliams, Jonathan Todd, Keir Starmer, Labour conference 2022, Mini-Budget
