British Prime Minister Theresa May’s Brexit deal is dead. It is just not buried.
The Prime Minister hopes to raise it Lazarus-like and present herself as a political Messiah. But her deal has been shot, knifed, strangled, knocked over the head with the candlestick and thrown into a ditch.
To put the chances of a political miracle into perspective, let us look at the next worse defeat in modern British political history. The current British government lost by 230 votes. The next nearest defeat was in 1924. Ramsay MacDonald’s Labour government had dropped a prosecution against John Ross Campbell, editor of the communist newspaper “The Workers’ Weekly” after he published an article calling on the British armed forces to mutiny in support of a socialist revolution. In that case the majority against the government was a mere 160.
Theresa May likes to portray herself as strong and stable leader with a Churchillian touch of the British bulldog. A better description would be bull headed.
Parliament has given the Prime Minister until Monday to perform her miracle and come up with a Plan B. She has responded by calling a meeting of all party leaders that will dispense with red lines and reach a compromise, breathe new life into the EU Withdrawal Bill and win over 230 dissenting members of parliament. If this miracle were to happen the result would be a horribly stitched Frankenstein monster .
The biggest problem is not so much the terms of the agreement as the bitter divide between the ruling Conservatives and the Opposition Labour Party of Jeremy Corbyn. The Conservative government is being driven by its far-right wing and Corbyn is so far on the left of the political spectrum that he is in danger of dropping off. His policies are so extreme that the Conservatives are five points ahead in the opinion polls despite the total Brexit disaster. Corbyn’s only hope of winning power and creating a British workers’ paradise is to allow Theresa May to create a chaotic vacuum into which he can step.
That is why, in spite of losing the vote on the EU Withdrawal Bill by 230 votes, the Conservative Party and Northern Ireland’s Democratic Unionists united against Corbyn’s motion of no confidence in the government. They hate the Brexit deal. They are frightened of the Brexit Deal. They hate and are frightened at the prospect of a Corbyn government even more.
Even if Labour and the Conservatives can surmount their ideological differences for the common good there are other parliamentary differences which need to be overcome. The 2016 referendum was called to resolve the remain/leave split within the Conservative Party. It has only turned the crack into a yawning fissure. Not so well known is a similar division within Labour ranks. It would become painfully apparent should Corbyn succeed in orchestrating and winning a general election.
Theresa May is totally opposed to a second referendum. She argues that membership of the EU is not the only issue at stake. The wider—and more important—issue of British democracy is also threatened. British voters were asked what they wanted: In or out. They voted out. It is the duty of the political class to respect the majority decision of the electorate and implement it.
The problem is that the prime minister’s position ignores the political reality that she has failed to implement the mandate of the people. The deal that she has negotiated is unacceptable to their parliamentary representatives who are successfully mirroring divisions within the wider British public. The chaos of no deal is also unacceptable. The only credible alternative is to put the question back to the people in a referendum and to bury Theresa May’s EU Withdrawal Bill.
* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopedia of the War” and the recently published “America Made in Britain". He has a weekly podcast, Transatlantic Riff.
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51 Comments
The chaos of no deal may be unacceptable. It may also be unavoidable.
The Brexit disaster aside (polls going in favour of remain) Tories hate Labour and Labour hate Tories, Is it not time to point out to the voter that we are a third party to vote for AND have learnt from the coalition?
On Wikipedia the MacDonald figures are 364 and 198 which makes a majority of 166 (https://en.wikipedia.org/wiki/List_of_votes_of_no_confidence_in_British_governments#Defeat_of_the_MacDonald_ministry). While I may disagree with some Labour policies these policies are not extreme when historical comparisons are made. A 230 majority to be overturned only needs 116 people to change their minds.
On Newsnight on Wednesday evening Vince Cable stated that his position was to get Theresa May to support a referendum on her deal verses remain and to take no deal off the table. If we assume that 117 Conservative MPs would vote against their government if the policy was to hold this referendum then only about 70 Labour MPs would need to vote for this, to get it passed.
The 1924 adminisration of Ramsay Macdonald relied on the support of Liberals. Asquith, the Leader of the Liberal Party, called for the appointment of a committee of enquiry on the Campbell case, as this would allow Labour time to survive the scandal, but MacDonald would not allow it. He said that if MPs voted in favour of the enquiry, then the government would resign. They consequently voted for the enquiry with a large majority, so MacDonald announced that the Labour government would resign after only nine months in office.
Vince Cable might possibly be able to get a deal to support a referendum between the current withdrawal agreement on offer from the EU and revocation of article 50. I think as Michael BG writes, It would need the support of around 70 labour MPs and the SNP joining with Libdems to put together a majority in Parliament.
The problem for Teresea May is she cannot afford to lose the support of the DUP,as she likely would if she advocates such a policy. She would need cast iron committments that Libdems would not vote against the government in a no confidence motion.
If Lib Dems want to progress they should stop parroting Tories in personal attacks on Corbyn…. which, by all accounts, are counter productive and merely remind people of the Coalition days. If you leave him alone he’ll probably self-destruct anyway, and by 2022 (by then 73) he will probably be back on his allotment.
Instead Lib Dems should get their thinking caps and produce some positive radical policies (as suggested on LDV by Katharine Pindar) to tackle inequality and poverty – all of which are now at 21st century highs. That is the thorn in the foot which fuelled Brexit.
Just as important, promote some fresh post Coalition faces to campaign and take the lead. Focus on appealing to the general public’s sense of justice, fairness and re-uniting society post Brexit if it happens. Yes, stand up for minorities, but don’t forget the needs of families and the elderly which effectively comprise the vast majority of the electorate throughout the UK. As a start halt the roll out of the tainted and failed Universal Credit….. and if this means saying we get it wrong in Coalition, then just say it..
@ David Raw,
“Instead Lib Dems should get their thinking caps and produce some positive radical policies (as suggested on LDV by Katharine Pindar) to tackle inequality and poverty – all of which are now at 21st century highs. That is the thorn in the foot which fuelled Brexit.”
Absolutely right. I’d say it’s not just in the UK. There is an EU wide problem too as we see, just across the channel for instance.
If everything was working well in both the UK and the EU there’d be very few Leavers. Even I would be an enthusiastic Remainer!
If we think we have it bad here…………
https://www.reuters.com/article/eurozone-greece-bailout-pensioner/for-greeces-austerity-hit-elderly-bailout-will-never-end-idUSL5N1V72OW
David Raw,
Gladstone’s famous quote could aptly be applied to Brexit – “Liberalism is trust of the people tempered by prudence. Conservatism is distrust of the people tempered by fear.”
Improvements in general living standards are not generated by government action but the conditions for improvement can be nurtured by the state.. Living standards improve as a result of the innovation and collective endeavour of individuals and firms around the world, that enable us to exchange and enjoy a vast array of goods and services that far surpasses anything available to past generations.
Globalisation brings with it winners and losers as Asian societies with their vast populations develop, catch-up and surpass the developed economies.
We live in a rapidly changing world where many of the old certainties are gone for good. We will need to be able to develop a resilience across society, so that we can retrain and acquire the skills in adulthood that are needed to maintain a level of prosperity and public service provision that will be increasingly challenged by more dynamic societies. Lifelong learning and development has to become a key focus in the nurturing of conditions to improve resilience across society.
@ Joe B, Joseph Bourke, JoeBourke et al (how many alias’s have you got Joe ? Does it increase your opportunity to beat the clock posting limits ?)
You say, “Improvements in general living standards are not generated by government action”.
Well, really ? Tell that to the pre-war Lloyd George or the post war Keynes and Beveridge. Tell that to the two little uncles I would have had if my Granddad had been able to afford the Doctor’s fees in 1926. Tell that to John Wheatley when his Act of 1924, combined with local government produced 508,000 houses, provided employment for many and decent living conditions outwith the many slums..
I’m afraid I’m not stuck in a Victorian time warp with limited vision…………. and neither was Jo Grimond in the days when he campaigned for a Highlands and Islands Development Board. Nor do I believe in a mechanistic utilitarian accountant’s view of the world where ‘the market’ provides all the solutions.
Gladstone was a man of his time which ended when he left office in 1894. The problem with ‘the market’ today is that gives the cream to those who control it and the crumbs to those who don’t.
nigel hunter 18th Jan ’19 – 10:10am…………… Tories hate Labour and Labour hate Tories, Is it not time to point out to the voter that we are a third party to vote for AND have learnt from the coalition?………………..
Well from my reading of LDV; LibDems hate Labour more than they hate Tories (before someone tells me it’s just Corbyn’s Labour that is their target I suggest you look back at this site when Miliband was Leader).
As for ‘learnt from the coalition’ how anyone, after reading the majority of posts on here, can say that is beyond me. If anything there are more ‘free marketeers’ and ‘private good; public bad’ enthusiasts than during the disaster that was a Tory/LibDem coalition.
David Raw,
the improvements in living standards we have seen in the post-war period are by no means limited to the UK or western society. They are world-wide. For China they began in earnest when the communist party embraced modernization and moved away from Mao Zedong’s revolution towards their own form of state capitalism It is not the dictates of the Chinese communist party that has tangibly delivered the improvements in living standards that the Chinese population has achieved. It is through the efforts and enterprise of hundreds of millions of people being freed from restrictive government controls and seeking to improve their lot in life.
The provision of public services and the maintenance of adequate welfare provision is a crucial element of a functioning society, but the government is not the be all and end all of the improvement in living standards. For that we have to be able to engage with Europe and the rest of the world on an equal basis with a population that has the education, skills and wherewithal to compete in the modern world.
The global market isn’t going anywhere. We have to be able to deal with it, if we are to be able to maintain the kind of public service provision baby boomers have benefitted from in the post-war period.
@Michael BG
Whilst highly counter intuitive, it is just plausible, as you suggest, that Theresa May could reluctantly agree to take “no deal” off the table and apply to the EU for an extension of Article 50 in order to hold a referendum on her deal versus remain. It might finally dawn on her that the only credible Plan B options which stand a chance of commanding a HOC majority are accepting a second referendum and/or a much diluted version of Brexit (Norway plus?).
Either way, however, this would totally shatter her personal credibility (unless, of course, her deal went on to win such a referendum!) and would also open the divisions in her party into a gaping chasm. Why do you assume that only 117 Conservative MPs would vote against their Government if its policy was to proceed with another referendum? Discounting possible abstentions, this necessarily assumes that 200 of them would support what would loudly be denounced by their hardline Brexiteers as an act of “betrayal”. My prediction is that the Tory rebellion would actually be much higher than 117 in these circumstances – and, of course, the DUP would also most probably vote against.
Your calcuation that only about 70 Labour MPs would need to vote for another referendum is therefore highly doubtful. We would almost certainly need many more Labour MPs than that to join Lib Dem/SNP/Plaid/Green MPs in any HOC vote. Unfortunate and inconvenient as it is, the support or opposition (whenever he finally stops prevaricating) of Jeremy Corbyn is therefore still likely to be decisive; so we cannot afford to dismiss him and his acolytes as an irrelevance, as could be implied from your original comment.
Expats,
anyone going to the Libdem website to read the manifesto https://www.libdems.org.uk/manifesto will be left in no doubt as to the disdain for this government:
Economy and Business – “The Britain we want requires a successful, sustainable and balanced economy – to create jobs and opportunities for everyone who is willing to play their part, and to generate the revenue needed to fund public services.
But the Conservatives have consistently put their own short-term priorities above long-term prosperity. They have neglected action to improve Britain’s poor levels of productivity and failed to stimulate innovation in industry. They have done nothing to redress the country’s profound regional and structural economic imbalances.
Liberal Democrats want to ensure that the imagination and effort of entrepreneurs and workers alike are harnessed to the full, not held back by low pay, discrimination, inequality or a lack of support for training and innovation.”
Health and Social Care: “The NHS and social care services are in a state of crisis. When people turn for help, too often help is not there.
Under the Conservatives waiting times have increased, staff are/feel embattled and undervalued, while need continues to grow and patient care suffers. The inequality gap in life expectancy is growing based on where people live and how much they earn. The Conservatives have contributed to this by cutting public services we all rely on.”
Schools “Our schools are critically underfunded and children’s education is suffering as a result. The Conservative’s funding cuts mean schools are struggling to afford basic supplies and teachers are being put under impossible pressure.”
Families & Communities: “For too many people, the social safety net is not working as it should. The Conservatives have presided over disastrous welfare reforms which have left families unable to make ends meet, policing cuts which have left our communities less safe, and a housing crisis which has left millions without a secure, affordable place to call home.”
Joseph Bourke 18th Jan ’19 – 7:37pm……….Expats, anyone going to the Libdem website to read the manifesto https://www.libdems.org.uk/manifesto will be left in no doubt as to the disdain for this government:………..
A great pity, then, that such ‘disdain’ is not more often expressed on LDV threads. Reading the Labour manifesto shows far more commonality than difference; again a great pity that the authors seem unable to find article to reflect such.
BTW, Joseph, your post has a certain uniqueness in that it doesn’t criticise Corbyn/Labour.
Joe, it is often suggested that the Conservative Party will split over Brexit. However, the no confidence vote on Wednesday showed that all Conservative MPs and the DUP voted to keep this government. It is therefore possible that even if there is a referendum on Theresa May’s deal verses Remain the Conservative Party will stay together and the DUP will continue to support it. It is possible this would still happened even if Remain won the referendum. So we shouldn’t get into promising supporting a Conservative government. The Conservatives could win a no confidence vote if the DUP or us just abstained.
Sean Hagan, 202 MPs voted for the Government’s deal, 196 of them Conservative MPs. My assumption on Conservative MP voting is that while some who voted for her deal without a referendum might vote against a referendum, some of those who voted against her deal would vote for a referendum on her deal. I think there are about 150 Conservative MPs who hold an office and so have to vote for the Government’s position. So I have assumed that 50 other Conservative MPs would support a referendum on her deal; together with us, the SNP, Plaid Cymru and the Caroline Lucus making 322 out of 642. However, even if the only Conservative MPs who voted for the government’s position were holders of office the number of Labour MPs only rises to 120. (In June 2016 172 Labour MPs voted that they didn’t have confidence in Jeremy Corbyn, so 120 is not an unreasonable figure).
@Michael BG – thank you for clarifying the basis of your calculations surrounding the parliamentary arithmetic. However, although your numbers seem to add up (give or take one or two MPs), they are necessarily based on various assumptions which are merely speculative. For example, you assume that the entire Govt “payroll vote” (approx 150 Tory MPs) would inevitably vote for HMG’s position, even if this was to support another referendum on May’s deal versus remain, whereas in reality this policy would probably provoke a substantial number of ministerial resignations. As a result, you have almost certainly under-estimated the number of Labour MPs who would need to vote for such a referendum in order to secure an overall HOC majority. Also, you cannot simply assume that Labour MPs who voted in 2016 to express “no confidence” in Jeremy Corbyn as their leader still hold that view or that they are necessarily pro-Remain or likely to support another referendum.
I therefore take a rather more cautious view than you do. My personal assessment is that a HOC majority for another referendum is possible, especially once other options have been eliminated, but far from certain at present. It would be dangerously complacent to assume that it’s “in the bag”, as some have suggested on LDV.
I find it a bit of a stretch to propose a deal that was solidly rejected by Parliament to the people. This would logically imply Parliament approval after it had won in the People’s vote, and would be another perilous case of an “instructed Parliament”. We can observe currently where that flawed concept leads, but at least the electoral commission would have presented the public with two practicable and EU-agreed options Parliament could readily enact.
Leaving this aside, I believe if May proposed this, it would win a majority in the HOC, because it would unite all, overt and hidden, remainers, still a clear majority of MPs.
This would be a scenario in which this Government had decided to self-destruct: support by an intact Tory- (or Labour-?) party is unthinkable, requiring such a vote to be followed by another general election, anyhow ending May’s political life.
An interesting side-effect would be that it could also end Corbyn’s Labour-leadership, unless he finally endorses remain.
@ JoeB,
“Improvements in general living standards are not generated by government action but the conditions for improvement can be nurtured by the state.”
This is just more neoliberal nonsense, verging on libertarianism, albeit slightly softened by the words following ‘but’.
Improvements in living standards can and do arise from direct government action too. Examples would include the NHS, the state run education system, the government funded road and railway networks, the operation of the civil service, the government run police, courts and armed forces etc.
The financial system itself depends on government. The bits of paper we call ££ are government IOUs. There is really no such thing as free capitalism. It’s all a form of State Capitalism of one form or another.
Peter Martin, Why are you looking so hard to find things to disagree about with Joe B? Your argument “Improvements in living standards can and do arise from direct government action too. Examples would include the NHS, the state run education system … ” all of them are covered under Joe’s comment “the conditions for improvement can be nurtured by the state”.
He says ‘nurture improvement’, you say you say ‘arise directly’. He says potato, you say potaato. Why not call the whole thing off and instead look for things you can agree on?
But David, economists only exist to argue unprovable theories with other economists while the rest of us try and make the world function.
Innocent Bystander,
there may be some truth in your assessment of academic economists, but most big investment banks and multi-nationals will have an economics department as part of their business planning function.
You need practical men to translate economic ideas into workable policy. Karl Marx was undoubtedly a geat econonic thinker and philosopher, but his analysis of the underlying poblems of capitalism in Das Kapital was a much greater contribution to
human knowledge, than the proposed solution of a “forcible overthrow of all existing social conditions”, outlined with Engels in the political pamhler – The Communist Manifesto.
Joseph,
But what use are they?
As a guide the UK has won the Nobel Prize for Economics nine times. China has never won it once but their current balance is 162 billion dollars in the black and ours is 90 billion in the red.
Could we persuade our economists to go and “help” them and give us a chance to get back on our feet?
@ Innocent Bystander,
“……..their current balance is 162 billion dollars in the black and ours is 90 billion in the red.”
Look, there’s no mystery about this.
IF we want a current balance which is in the black we need to do what every other large net exporter does and hold down (ie manipulate) the value of our currency. That way we won’t be able to afford so many imports, our exports will be more competitive and it will make more sense to sell goods and services overseas rather than on the home market.
How do you fancy £1.00 = US$0.80? That should do the trick.
Mind you, I can’t see you being too popular with the voters afterwards!
Sean Hagan, I hope that what I wrote does not give the impression that I think that a referendum is in the bag. I have made a huge assumption and that is that Theresa May will support a referendum as the last chance of getting her deal agreed. However my assumption that there are more than 150 Conservative MP who would support a referendum on May’s deal verses Remain I don’t think is such a big assumption. According to the BBC 185 Conservative MPs stated they would vote Remain in the referendum (https://www.bbc.co.uk/news/uk-politics-eu-referendum-35616946). I also don’t think that assuming about 70% of Labour MPs who vote no confidence in Jeremy Corbyn would support a referendum is a huge assumption, especially as it is the Labour Party’s policy to support a referendum as a possible solution. According to the BBC figures in June 2016 218 Labour MPs were pro-Remain.
I think that a referendum on May’s deal verses Remain is the best option for Theresa May to take. I think it would be more risky for her to call an election and for the Conservative Party only to support candidates who would vote for her deal. There were 118 Conservative MPs who voted against the deal and these would need to be replaced with candidates who would support the deal. I think the number of Labour MPs after such a general election would be greater than at present.
Arnold Kiel, there would be no need for a general election after a referendum. If Remain won then it is possible that May would continue as PM, as was proven on Wednesday all Conservative MPs still unsurprisingly support a Conservative government and as I wrote above it would only take all of our MPs to abstain for the Conservatives to win another vote of confidence no matter what the DUP do.
@ David Evans,
“Why are you looking so hard to find things to disagree about with Joe B?”
Because he’s wrong. That’s why.
For example, how many times over the years have we heard this sort of thing? And from all political parties too:
“The Britain we want requires a successful, sustainable and balanced economy – to create jobs and opportunities for everyone who is willing to play their part, and to generate the revenue needed to fund public services.”
For as long as anyone can remember I would say. In my case I started to hear this message when the GDP of the UK was probably about 25- 30% of what it is now. What would we have all thought if we’d known that just 3 decades or so into the future we’d be three or four times times richer? In aggregate.
Would we have thought that the NHS and state education would be creaking at the seams? That young people wouldn’t be able to find jobs? That there would be so many homeless? That council spending was cut back to the bone because we ‘couldn’t afford’ to fund local govt?
Well, of course, we wouldn’t have thought that at all. We’d have said we’ll be much richer and we’ll all the money anyone could wish for to solve those kinds problems. Right?
Well no. It’s obviously not right at all! We can see that for ourselves. It doesn’t mean that we don’t aim for a more prosperous economy but economics only takes you so far. In any case “revenue” doesn’t fund public services. The main thing is, though, that the politics have to be right too.
Innocent Bystander,
As John Maynard Keynes biographer, Robert Skidelsky has been at pains to point out the role played by uncertainty in shaping economic outcomes is central to Keynes general theory. Keynes noted “The state of confidence is a matter to which practical men always pay the closest attention.” According to Keynes, the ‘state of confidence’ is constantly in flux. When it is high, business thrives; when it is depressed, on the other hand, the economy contracts, and can even end up in a permanent state of under-utilisation of resources.
Keynes’ analysis of the need for and role of government intervention is predicated on the state of uncertainty prevailing in the economy. The main contribution that economic policies can make is to reduce uncertainty. Policies are not intrinsically ‘good’ or ‘bad’, but rather, their effectiveness depends, first, on the extent to which they decrease or increase macroeconomic uncertainty, and second, on their ability to coordinate expectations towards a better equilibrium. Keynes was not in favour of systematic government intervention in the economy under all circumstances and all states of the world. In his view, government should abstain from interfering with the normal functioning of the economy and should only step in under exceptional circumstances, in particular in the presence of a heightened state of uncertainty. This point was unfortunately lost on many economists and politicians after the Second World War, who advocated government intervention under all circumstances and all states of uncertainty, thus leading to policy mistakes such as the runaway Inflation of the 1970s.
China is yet to win a noble prize in economics but I am sure it is only a matter of time. Tu youyou, the chemist, was the first female Chinese citizen to win a Nobel prize. Her discovery of the anti-malarial compound Artemisinin has saved millions of lives. Tu says she was influenced by a traditional Chinese herbal medicine source, ‘The Handbook of Prescriptions for Emergency Treatments’, written 1600 years ago. Her grandfather was a Treasury minister. Her uncle is an economist and banker – perhaps one of those contributing to China’s resurgence as an economic power in the 21st century.
Peter Martin,
from the Libdem economic plan https://www.libdems.org.uk/economy
“Liberal Democrats reject the Conservative Government’s damaging and irrational commitment to run budget surpluses on both capital and revenue, which imposes completely unnecessary deep cuts in spending and limits the scope for much-needed capital investment. But we have no intention of just throwing away our hard-fought efforts to control the deficit during the Coalition years. Liberal Democrats will therefore commit to eliminating the deficit in day-to-day spending by 2020. This means we will be able to keep debt as a share of national wealth falling through the Parliament, unless there is a recession. Once we have brought current expenditure into balance we will ensure that overall public spending grows roughly in line with the economy. This means that we can improve key public services and provide them with the investment they need.
A long-term stable economy requires more than just discipline over spending. It requires us to invest in people, innovation and infrastructure in order to give our economy the opportunity to remain competitive for the future.
Liberal Democrats will commit to a responsible and realistic £100 billion package of additional infrastructure investment. This will prioritise:
New direct spending on house-building to help build 300,000 homes a year by 2022.
A programme of installing hyper-fast, fibre optic broadband across the UK.
Capital investment in schools and hospitals to support capacity increases and modernisation. Significant investment in road and rail infrastructure, including a continued commitment to HS2, Crossrail 2 and rail electrification.”
Joe, with great respect, since I am generally learning from your contributions, some of your arguments above seem more academic than practical. You tell us that Keynes said that when confidence is depressed the economy contracts. You say that the main contribution that economic policies can make is to reduce uncertainty. You add that Keynes suggested governments should abstain from interfering with the normal functioning of the economy and should only step in under exceptional circumstances, in particular in the presence of a heightened state of uncertainty.
Yes, but, surely at this present time it is the Government itself which has depressed business confidence, through its delays and divisions in trying to deal with Brexit. And economic policies presumably have to be implemented by governments. I suppose if Keynes was right, because of this impotence of both government and economists today, the economy must be contracting.
Am I missing something? Is that your conclusion? What are you suggesting should be done?
Might I make one plea – if you happen to write again that ‘You need practical men to translate economic ideas into workable policy’, could you make it ‘practical people’?
Katharine,
you make a very valid point in highlighting that the Brexit impasse is creating a great deal of uncertainty for business investment in the UK, both domestic and foreign. Government policy needs to recognize this and fill the gap by stepping up public investment.
Economic output (GDP) is generated in both the public and private sectors. in the public sector in health, education, defence, policing, roads etc. In the private sector in the myriad of goods and services we all consume on a daily basis. Output can be increased by employing more labour but there already large numbers of unfilled vacancies in both the public and private sector – close to the number of JSA benefit claimants. Consequently, there may be limited scope for increasing output by encouraging greater workforce participation.
To increase output per capita from the existing workforce requires an increase in the productivity of two factors of production – capital and labour.
Increasing labour productivity requires adequate levels of investment (both public or private). Private investment will most likely remain subdued until the Brexit conundrum is resolved. Therefore, it is public investment that we must look to, to ensure the economy can continue to operate at close to full-employment capacity and generate increased levels of wage incomes for the UK workforce – men and women alike.
@ JoeB,
I do often make the case that Govts shouldn’t run aim to run surpluses etc, because that is essentially household economics thinking. Phrases like “once we have brought current expenditure into balance” are just the same. Either inflation is a problem , and we have to cut back, or it isn’t and we don’t.
But it does need to go a bit further than that. As I was saying in my last comment. We are forever being pressed to make more and more with the implied promise that a bigger economy will generate more ‘income’ to ‘pay for’ the NHS etc etc. No one needs to take my word for it that it doesn’t work like that. Everyone can see for themselves what has happened in previous decades.
@ Katharine,
You are quite right to pull up Joe on his implied sexism. I’ve brought the work of Stephanie Kelton to his attention often enough so he should know better!
@ Katharine,
“the economy must be contracting.”
Well no it isn’t. Not in the UK.
https://tradingeconomics.com/united-kingdom/gdp-growth
But it has taken a negative turn in Germany.
https://tradingeconomics.com/germany/gdp-growth
There are lots of factors at play besides Brexit. Lib Dems like to say London house prices are falling because of Brexit. But they are falling in Sydney too.
My reading is that we are going to see a slump on a worldwide scale this year. So it’s going to be a rough ride but not particularly because of Brexit. The eurozone will probably have it much worse than us. The EU’s favoured euro structure is far too rigid to absorb shocks. There’s nothing to give in the event of a crash. The analogy is old fashioned car design. They were built very solidly with a sturdy chassis and thick metal panles. But there were no crumple zones. They were death traps in the event of an accident.
Peter Martin,
I don’t want to repeat the same conversation ad infinitum. This recent Intelligencer article summarises the points I have previously made re: MMT http://nymag.com/intelligencer/2019/01/modern-monetary-theory-doesnt-make-single-payer-any-easier.html
The Libdem economic plan advocates big increases in sustained long-term investment in the UK economy financed by increased borrowing proportionate to economic growth. This is coupled with increased spending on essential public services including health, social care, education and welfare financed by a combination of proportional increases in line with economic growth and tax increases including wealth taxation. The rationale for this economic approach is set-out in the manifesto and economic policy papers.
Michael BG,
I must admit the idea of May staying on as PM after a second remain vote is so radical, I never really thought about it. It would mean the UK having a PM (and a cabinet) that has wasted half a term and its reputation, at home and abroad, on a hopeless and damaging idea with very little energy or creativity left for anything else. She would even have to put up with freedom of movement, while being strongly inclined to double down on suppressing non-EU immigration, her only discernible policy conviction. Hard to imagine, but not necessarily to be excluded, I agree.
I am afraid the idea that populist nonsense like Brexit can be overcome by state-sponsored economic revitalisation of depressed regions is unrealistic. Apart from good infrastructural boundary conditions (transport, taxes, healthcare, education, etc.) there must be private entrepreneurial capital and creativity attracted to these places. Not enough of that is happening, neither in the north or west of the UK, nor in rural France, eastern Germany, all of Greece, southern Italy, flyover America, or rural and western China. Not all of these countries are simply to dumb to do the right thing.
Building houses, roads or rail-tracks, and hiring doctors, police-officers and teachers will not change that (and should not be called investment).
China was the last country that fully exploited the closing time-window in which manufacturing drove mass employment. Strong service-sectors thrive in urban environments, and the more sophisticated ones will also face massive automation. What is left is cutting hair, driving white vans, and serving food and drink. So the “unbalanced” economic structure of the UK is actually the future of us all.
We can only hope that Europe can stem the current trend to sink in populism by more radical wealth redistribution. Little wonder Brexit came before the gilets jaunes and the AfD. The UK has cut social spending more radically than the continent. The US is obviously following the opposite path: the rich are scrambling to totally disenfranchise the poor, so far with good success. Brexit is in essence a fight between the French (implicitly demanded by leave-voters), and the American (tacitly promoted by leave-leaders) models of dealing with the demise of unqualified dignified work.
@ Joe B,
Look, Joe, I don’t care where “the rationale for this economic approach is set out”. It’s wrong.
You are saying Govt spending should be “financed by increased borrowing proportionate to economic growth.”
Just think about this. You’re saying that if economic growth is 5% we end up with 100 times more borrowing than if growth is only 0.05%.
This is completely the wrong way around.We’ll end up with too much inflation in the former case and too little, if any, growth in the latter.
So my all means stop repeating yourself and think a little more about what you’re saying.
PS I might just add that governments can’t really borrow in their own currencies which are simply their own IOUs anyway. If I lend you a bag of sugar you can give me your IOU. If I lend you another bag you just give me another IOU. Any request to borrow back a previous IOU is quite meaningless.
@ Arnold Kiel,
“I am afraid the idea that populist nonsense like Brexit can be overcome by state-sponsored economic revitalisation of depressed regions is unrealistic. ”
Why? The lead post today calls for moving the Capital away from London. Say we moved it to Middlesbrough which is a depressed city by most standards. It wouldn’t stay depressed for very long.
When Bonn was the capital of West Germany it was a thriving city. Now that most Govt has moved to Berlin it is less so. A good part of the ” private entrepreneurial capital and creativity attracted to” Bonn has moved to Berlin too.
We see the same story in many other countries. There’s a lot of private capital in Washington DC simply because that’s where the Federal Govt and therefore the Federal money is. In Australia the area around Canberra would probably be nothing more than a few sheep stations had not the Australians decided to build their capital city there.
Governments in all western countries are an integral part of the system. They issue money when they spend it and destroy it when they collect taxes. We are all part of a system of State Capitalism no matter where we live.
PeterMartin,
economic growth athough slowing over the longer term has a relatively consistent trend of a little over 2%. Investment spending and spending on public services including redistribution can increase in line with with economic growth (short-term cyclical fluctuatiions do not change the stready increase in spending proportionate to economic growth).
Real increases in tax including wealth taxation provide for increasing the proportion of GDP alloacated to the provision of public service provision and social welfare redistribution.
Inflation is best controlled via monetary policy. The idea of increasing tax levels at a time when prices are increasingly rapidly and household disposable incomes are being eroded by inflation is unrealistic and therefore impractical as the article linked above points out.
Libdem economic policy is well thought out, Peter. You are displaying the zealotry of a convert to a new religion(that is not based on rationality or peer reviewed empirical research) and an irrational rage at being challenged to justify the practicality of your beliefs. It is not a suitable foundation for a national economic policy.
Peter Martin,
the Berlin example supports my viewpoint. Bonn continues to do ok as part of the old “rheinischer Kapitalismus” area, while Berlin continues to be economically underdeveloped. We now have some digital startup activity here, but that is because Berlin is (with or without the Government) an attractive city to young people and still rather affordable. Leeds or Sheffield are, with respect, very different cases.
Arnold,
point taken that public investment cannot of itself resolve the structural damage to the economy that Brexit would involve. But what we are talking about here is the economic uncertainty that is currently depressing the level of private sector investment, while we are waiting for the Brexit issue to be resolved. Increased levels of Public sector invesment can mitigate the short-term impacts on demand of a delayed private sector investment decisions.
There is a good objective analysis of the Brexit related issues facing the British economy in Investors chronicle https://www.investorschronicle.co.uk/shares/2018/12/27/brexit-and-the-uk-economy/. There are no conclusions but the diagnosis indicates some serious problems ahead.
Joseph Bourke,
the only somewhat beneficial Brexit resolution is its cancellation, the sooner the better. Consequently, compensating public “investment” might have some payback only in that scenario.
@ JoeB,
You can’t just assume that we’ll have economic growth of 2%. It will vary and the responsibility of the Govt is to borrow and spend countercyclically. In other words just the opposite of what you suggest, which is to borrow and spend more when the economy is doing well and less when it is doing poorly.
This is just common sense. Goodness knows why you can’t see that.
I did spend a couple of years teaching maths in my younger days. I’m not sure I was really cut out for that job! One of my failings was that I did get somewhat exasperated when I’d tried to explain something, that was really quite simple, several different ways and still the penny wouldn’t drop!
I feel like that now.
@Arnold,
Yes, it’s true Bonn still does ‘OK’ and Berlin still has problems for historical reasons. But nevertheless Berlin has benefited from the switch. Which isn’t 100%, as you’ll know. There is still quite a lot left in Bonn.
I would say it’s a general rule in the world, with very few exceptions, that the location of the seat of Government is also an area of greatly increased prosperity because of that.
These figures are from Canberra. You’d have to visit the place to understand what I’m getting at! Other that government, the geographical location just doesn’t have anything going for it!
https://www.canberratimes.com.au/national/act/census-2016-act-household-income-300-a-week-above-national-median-pay-20170627-gwzgpk.html
Peter Martin,
counter-cyclical fiscal policy is part of libdem economic management as highlighted in the opening paragraph of the section on responsible finances
” we will be able to keep debt as a share of national wealth falling through the Parliament, UNLESS THERE IS A RECESSION, Once we have brought current expenditure into balance we will ensure that overall public spending grows roughly in line with the economy. This means that we can improve key public services and provide them with the investment they need.
The OBR prepares and updates the medium-term growth forecasts semi-annually. Public spending, tax and borrowing plans are developed around those forecasts together with political decisions around the share of national income that will be allocated to delivery public services. Tax receipts and borrowing outcomes may diverge from forecasts – that is normal – and forecat are updated and adjusted for each budget period.
As the intelligencer article notes “a neo-Keynesian approach… holds that when the economy goes into recession, the government should engage in deficit spending to make up for lost economic activity in the private sector, reduce unemployment, and engage otherwise idle resources. The government uses fiscal policy to keep public debt at an appropriate level and uses monetary policy to control inflation. MMT flips this on its head, espousing the use of fiscal policy to control inflation and of monetary policy to keep the public debt sustainable.
If the government prints and spends money when the economy is at or near full employment, MMT counsels (correctly) that this will lead to inflation, and prescribes deficit-reducing tax increases to reduce aggregate demand and thereby control inflation.
See how we have ended up back where we started? Whether you take a Keynesian view or an MMT view, if the government spends more, it’s likely going to need to tax more, sooner or later.”
@JoeB,
Technically a recession is two quarters of negative growth so you can have growth as low as you like, and there’s no recession as long as it’s just about positive. This is the state of many struggling eurozone economies.
So if you are going to tie the amount of deficit you are prepared to run with growth in the economy, even with your proviso, you’ll likely end up with a low growth / low deficit/ high unemployment economy indefinitely.
Just as we see in the eurozone in many places now.
Peter Martin,
counter-cyclical fiscal policy is a short-run measure to stimulate demand and restore output to normal operating levels. Of itself it has no lasting long term effects on economic growth (Trumps $1.5 trillion corporate tax cut is a case in point). Sustainable growth comes primarily from increased levels of productivity (and to a lesser extent from increases in the size of the workforce as a consequence of higher levels of participation or net inward migration).
Fiscal policy does not of itself grow the economy over the longer-term. Investment in productivity-enhancing infrastructure creates the conditions in which both the public and private sectors can grow output by enhancing productivity.
This is why the Libdem economic plan is focused on the fundamentals of building a stronger economy with :
– a major programme of capital investment and research & development, aimed at stimulating growth, innovation and entrepreneurship across the UK.
– Reform of the tax system to help businesses invest, rebalance the economy, properly fund our public services and ensure the wealthy and multinationals pay their fair share.
– Doubling innovation and research spending across the economy in the long term.
@ JoeB,
“counter-cyclical fiscal policy is a short-run measure to stimulate demand and restore output to normal operating levels. Of itself it has no lasting long term effects on economic growth”
You’ve made this assertion numerous times without any explanation of why you think it is true. Or maybe, it is just that you don’t understand why someone else thinks it’s true?
Yes, Government intervention can both stimulate demand and increase growth albeit at the risk of creating higher than desirable levels of inflation. It can be a tricky balance to get right. !
It doesn’t mean though that it shouldn’t try, though!
But so is the process of trying to increase growth through monetary policy a tricky process to get right. ie Encourage the private sector to do the borrowing instead. We’ve seen the end result of that. Interest rates very close to zero, a stagnant economy weighed down by excessive levels of private sector debt, and most young people priced out of the housing market. The ones that haven’t been are in grave danger of being stuck in a position of negative equity for years if the bubble collapses.
Her deal was decisively rejected so she tries to tweak it. This shows a fundamental misunderstanding of her predicament. It is possible we could get a better deal but not from our present situation. If we are torn between no deal and remain I would be scared of the outcome. A great Yorkshire expression is “if in doubt, do nought”. This is the courageous decision, Theresa May.
Peter Martin,
it is explained in the following two sentences:
“Sustainable growth comes primarily from increased levels of productivity (and to a lesser extent from increases in the size of the workforce as a consequence of higher levels of participation or net inward migration).
Investment in productivity-enhancing infrastructure creates the conditions in which both the public and private sectors can grow output by enhancing productivity.”
In the UK the provision of public services accounts for a little under 20% of output. The majority of output (80%+) is produced in the private sector.
In normal economic conditions with close to zero levels of cyclical unemployment as now, fiscal or monetary stimulus merely serves to increase prices, not output. We have seen this many times in different countries over the years.
The economic fundamentals don’t change. Maintaining a healthy economic environment in which advances in technology and innovation can continue to drive economic growth requires sustained investment by both the public and private sectors.
Domestic firms cannot justify investment in excess of that required to meet the demand for their products and services. When such a large component of UK consumption is furnished by overseas producers there will inevitably be a mismatch between domestic investment by UK firms and domestic consumption. That balance is made-up by overseas producers recycling their surpluses into UK property and financial assets including lending to UK consumers for the financing of house purchases and consumption, driving up household borrowing.
The foreign trade imbalance arises as a consequence of large productivity gaps (around 15%) between the UK and its major trading partners. It is the productivity gap that needs to be closed. No amount of currency manipulation, printing of money, fiscal or monetary interventions will address the fundamental structural issues that bear down on UK competitiveness.
@ JoeB,
It isn’t explained. It’s just more assertion.
A point that strikes me is that may be that 80% is produced in the private sector but the money used is 100% issued by government. Even so-called bank issued money is just a liability measured against government money.
You say fiscal or monetary stimulus merely serves to increase prices, not output. Again there is no explanation. We can see what happened in the 30’s. We didn’t have any growth until the war started! That was brought about by the direct intervention of govt.
Where are you quoting from? Is this something you’ve previously written?
Peter Martin,
“We can see what happened in the 30’s. We didn’t have any growth until the war started!”
Actually, we did and quite robust growth at that https://www.theguardian.com/housing-network/2013/apr/19/1930s-house-building-economic-recovery
“In every year from 1933 to 1936, before rearmament could have made any difference, growth exceeded 4% per year. Growth was not driven by fiscal stimulus; indeed it blossomed at a time of fiscal consolidation.”
The experience of a strong economic recovery in the 1930s (outside the older industrial areas of the North and coalmining districts) is one of the reasons for the focus of LibDem policy on the fundamentals of developing a stronger economy with a major programme of investment in public housing.
@ Mr Bourke “Actually, we did and quite robust growth at that “. I suppose that must be the comfortable view from London and especially the home counties.
From what I was told by my mother and grandfather (who worshipped little Ellen Wilkinson), I have more sympathy Alan Price’s interpretation of the 1930’s.
5:32
Jarrow Song – Alan Price (1974)
ToNLiT
YouTube – 31 Jul 2007
David Raw,
it was a period of great poverty for the many. In particular for those who were unemployed and trying to survive on a meagre unemployment benefit, before the introduction of Beveridge’s welfare reforms after the war.
There was a stark difference between different regions of the UK, with the heavy industry regions of the North and the Wlsh valleys getting the worst of it.
But the UK recovery after the depression of 1929-31 s was much stronger than in the United States. Firstly, as a result of coming off the gold standard in 1931 following by forcing down interest rates from 9% to 0,6%. The devaluation of the pound boosted exports and the cheap money policy spurred business investment and private housebuilding. Rearmament began in earnest from 1935/1936 adding fiscal stimulus to the mix. For many in London, the South and the Midlands it was a time if improving living standards compared with the misery of the 1920s/early 1930s.
This was also the period when Keynes was writing his General Theory and would have observed the uneven effects of government policy and the lack of needed investment in the distressed regions of the North and Welsh Valleys.
Macroeconomic statistics are of little use in conveying the real poverty in these regions. For that we have George Orwell’s Road to Wigan Pier written in 1936 in which he writes descriptively of the extreme poverty of the time and “the haunting fear of unemployment.”