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History rhymes

A new prime minister and chancellor attempt to put some economic and political “distance” between them and their predecessors, only to trigger a major economic crisis which leads to electoral defeat and a long period of opposition.  Not – or at least not yet – a story about Truss and Kwarteng’s disastrous first three weeks in office, but a broad description of the governments of Gordon Brown and John Major before him.

Like Truss, in both cases the new prime minister was (initially in Major’s case) selected by party members rather than the electorate as a whole.  And as a result, each had to deal with festering resentment on the backbenches – with MPs and party members alike preferring the outgoing, election-winning prime minister to the new and untested understudy.  This said though, as with Truss, Major and Brown became prime minister after Thatcher and Blair had become increasingly disliked by the broader electorate.  And it is for this reason that this weekend’s run on the pound may signal something more profound than merely the abject stupidity of borrowing in order to cut taxes for the rich, even as the majority are forced to choose between heating and eating.

Thatcher’s fortune – a double-edged one – was found in the North Sea.  Without the dollar-denominated income from oil and gas exports, and even with the incompetence of the opposition leaders of the period, it is doubtful that Thatcher’s brand of extremist neoliberalism could have survived the wrecking ball that it took to Britain’s industrial base.  With that oil revenue though, as Wales’ now deceased former First Minister Rhodri Morgan explained:

“Government had this amazing ability to spend oil revenues. Governments could afford things.  They didn’t have to worry about where the next few quid was coming from.  The Falklands War was eminently affordable.  Paying the cost of the rocketing unemployment benefit bill, as dole queues doubled, then trebled, wasn’t a problem…”

The North Sea also underwrote the “Big Bang” financial reforms which laid the foundation for the debt-based boom of the 1990s and early 2000s – and the inevitable bust which followed in 2008.  But the North Sea was always a fickle friend.  And among the – many – disasters that Thatcher presided over, the explosive fire on the Piper Alpha rig in 1988 – which briefly forced the UK to become a net oil importer – took the economic wind out of the Thatcher government’s sails.  Along with the pursuit of ever more extreme policies such as the hated Poll Tax and the privatisation of the electricity industry, the loss of economic momentum led to a string of by-election losses and a big decline in the polls.

As Thatcher’ star waned, Heseltine – who had allegedly planned his journey to 10 Downing Street on the back of an envelope – was waiting to plunge the dagger into her weakened back.  But, as Rishi Sunak found out recently, the Tory Party seldom favours assassins.  And with the old leader deposed, new contenders were free to enter the arena.  Coincidentally, Like Truss, John Major was a relative newcomer, having only entered Parliament a decade previously.  Although Truss is unlikely to match Major’s surprise election win two years after becoming leader.

Brown’s journey was somewhat different insofar as he had always harboured a deep resentment at the more charismatic (sociopathic?) Blair becoming Labour leader after the tragic death of John Smith – the last leader to at least pay lip service to social democracy.  Blair though, won thumping majorities in 1997 and again in 2001, leaving no obvious path to the top job for Brown.

Iraq changed everything.  Although protest is seldom a good measure of public opinion, the sheer scale of the anti-war demonstration – like the protests against the Poll tax in 1990 – signalled a broader dissatisfaction among the electorate.  Poor polling and by-election losses, together with a Tory Party which had finally begun to rebuild its base, threatened Blair with defeat at the 2005 election.  So much so that Blair announced that if elected, he would not serve a full term.  And with Brown and Blair appearing like Siamese twins throughout the campaign, it was clear to all that Brown was the anointed heir.

Like Major, the hapless Brown walked straight into an economic shitstorm, having bottled out of the “election that never was” in 2007.  Major had at least won a general election six months before Black Wednesday, causing economists, journalists and investors to assume that he had seen off the Eurosceptic wing of the Tory Party.  But Britain’s ignominious defenestration from the European Exchange Rate Mechanism – the forerunner of the Euro – revitalised the Brexiteers while ending the Tories’ public reputation for economic competence.

Brown was more fortunate in inheriting a more united Labour Party – although one which expected Brown to reverse some of the more extreme neoliberal excesses of the Blair years.  And prior to replacing Blair, Brown certainly gave the impression that he had the secret sauce to balance the economic needs of the majority without crashing the markets.  Instead, Brown stumbled into a global banking crisis which, while not of Labour’s making, exposed the degree to which Blair and Brown had used borrowing to inflate an unsustainable consumer boom.  The allegation that Labour had “failed to mend the roof when the sun was shining,” while mendacious, could not be shaken off.

 Adding to these prime ministers’ woes – as is the case for the current prime minister – they faced opposition leaders considered “safe” by the Versailles-on-Thames establishment.  Blair and Brown had spent their time brownnosing around the City of London while Major succumbed to economic failure and Eurosceptic division.  So that, long before the 1997 election campaign began, the establishment media and the SW1 commentariat had rallied behind “New” Labour as a better bet than a dangerously anti-EU Tory Party.

Similarly, while Brown and his chancellor, Alistair Darling, sunk under the weight of the post-2008 depression, the Tories surged ahead under the leadership of Blair-Brown clones, David Cameron and George Osborne – who were, laughingly as it turned out, believed to offer a bulwark against further Euroscepticism.  And while Keith Starmer lacks the charisma of a Blair or a Cameron – although this is hardly a disadvantage against Truss – he is a consummate Versailles-on-Thames insider, having previously served as Attorney General, and is the closest thing available to a safe pair of hands as can be found in SW1 as Britain crashes headlong into its worst economic crisis in living memory.

To have even the sliver of a chance of winning the 2024 general election, Truss needed to hit the ground running – delivering a kind of Churchillian pledge of a war economy and of nothing more than “blood, tears, toil and sweat.”  Instead, she, and her chancellor, Kwasi Kwarteng, in the first 21 days of her term in office appears to have caused Britain’s most loved monarch to lose the will to live, to borrow billions to bail out profiteering energy companies, and to hole the currency below the water line.  Like Gordon Brown before her, she will no doubt claim that these – along with the upcoming food and energy shortage, housing crash, insolvency wave and unemployment crisis – were nothing to do with her.  But to no avail.  Because like Brown, what she will be damned for is not so much presiding over the crisis as failing to offer a credible solution.

When Kwarteng stood up on Friday afternoon to deliver his mini-budget, Versailles-on-Thames anticipated what has long been acknowledged to be the combination of ingredients for a UK general election victory – to lean left on the economy while leaning right on social issues.  Instead, they were given a poorly conceived rehash of the kind of policies Margaret Thatcher could get away with on the back of North Sea oil revenues and which Edward Heath could attempt in the days when Britain had some remnants of an industrial base.  And, as Duncan Weldon at the New Statesman points out:

“The UK risks stumbling into the worst of all possible outcomes for short-term growth, with the government effectively taking money from those most likely to spend it (welfare recipients) to fund tax cuts for those most likely to save it. All amid a backdrop of a weaker pound, which raises the cost of imports, and higher interest rates, which slow growth further…”

While much of the run on the pound which followed Kwarteng’s announcement of debt-based tax cuts may have resulted from entirely reasonable scepticism about the UK economy’s ability to repay the debt, the deeper crisis may well stem from the revelation that Truss and Kwarteng – like Major/Lamont and Brown/Darling before them – simply do not have the secret sauce to repower the UK or to put an end to the tsunami of woes washing over us.

Truss, no doubt will want to ignore the fact that her government’s standing in the polls is the same today as John Major’s was in the aftermath of Black Wednesday, when the government had blown more than £15bn on failing to prevent the pound falling out of the ERM.  Nevertheless, as Ben Walker, founder of Britain Elects put it:

“By me, Truss’s problems are:

  1. a) few see her as a major improvement on Johnson
  2. b) the government is as unpopular as Major’s was during Black Wednesday

What ‘ceiling opportunity’ she had of pushing up her ratings is falling fast. It may have already fallen.”

The old saying has it that governments lose elections rather than oppositions winning them.  And it may well be that two years from now, former prime minister Truss will look back on Friday’s barely credible (even to the most diehard Tory) announcement that an already indebted country can borrow its way to growth, as the moment when her administration came off the rails.

As you made it to the end…

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