Martin Wolf, as so often, had it right in the Financial Times the other week. He argued that in the multi-headed crisis we now face, the proper response of government is to tell the voters that this is both a national and a global emergency and that national economic and fiscal policies will have to take these exceptional circumstances into account. The impact of Trump’s tariffs on the global economy could plunge us all into a deep recession.
Labour knew when they came into office that Russia’s attack on Ukraine had raised difficult questions about replacing stocks of equipment and munitions and increasing Britain’s defence capabilities. They also had a good idea of how far the Conservatives in office had run down public investment and juggled financial figures to avoid recognising that state revenues did not match public spending needs. It seems however that full realisation of the depth of the investment and income deficit only came when they were in office, well after they had boxed themselves in by promising not to raise any of the three main sources of taxable revenue. And they had not predicted the third shock, which has hit them six months after taking office: the impact of Trump’s second presidency on the global economy, on transatlantic relations and on the conflict in Ukraine and the Middle East.
These three crises together have undermined Labour’s growth strategy, and are likely to force it to choose unwillingly both further spending cuts and higher taxes. Yet here, as elsewhere, Labour remains timid and uncertain in making hard choices, let alone in persuading the public to accept them. Opinion polls show that most voters don’t yet support increased spending on defence, because they don’t yet see the Russian attack on Ukraine as directly threatening Britain. Most aren’t happy about cuts in welfare, but are content for overseas aid and other budgets to be squeezed to provide some of the funds needed rather than higher taxation.
Starmer’s popularity has shot up in response to his international negotiations to bring European governments together on defence in response to Trump. But he hasn’t yet taken advantage of that to change public understanding of how all this affects the UK’s security. Nor has he used it to persuade the public that Labour’s ‘Reset’ with our European neighbours should extend beyond defence cooperation to include moving back toward economic integration. Ministers make mealy-mouthed statements about negotiating economic relations with the EU with ‘ruthless pragmatism’ – which sounds much the same as the amoral transactionalism that Trump espouses. And ministers have tried to appease Trump in the hope that somehow he would be kinder to us than to Canada, Mexico or other partners – only to discover that the White House wants us to change our freedom of speech laws and reduce taxes on the US tech giants as part of the bargain.
We’re well ahead of Labour in making the case for more radical changes in policy. Ed Davey at the Harrogate Spring conference argued both for Britain following the Canadian example and standing up to Trump, and for embracing our neighbours and celebrating our shared values – even though negotiations on an economic reset are bound to be hard. Re-entering the customs union and the single market is essential to regaining domestic growth – even more essential in a world economy moving away from global trade to regional blocs.
I, like many other Liberal Democrats, wanted the Labour government to succeed, because the consequences of a failing Labour government and a no-growth economy at the next election could bring the hard right into power. So far they have shown weak leadership and economic policies as conventional as Ramsay Macdonald’s in 1929-31. This leaves us in the difficult position of wanting to warn the public of threats and hard choices to come which the public, Liberal Democrat voters included, do not want to think about. The Tories are off with the fairies, opposing both taxes and borrowing without saying what spending programmes they would have to cut. There are lines we are developing which we can take further: to argue for tax reform, which Labour seems frightened of; to push for the publication of the redacted paragraphs of the Intelligence and Security Committee’s Russia Report, to tell the public how far foreign interference in British politics has already gone, and to highlight hybrid warfare around our shores; and to lambast Reform and the Tory Right for accepting US money and ideology rather than standing up for Britain. But for social democrats and liberals who flourish best when the economy is growing, the international context is peaceful and society does not feel threatened, the next two-three years are unlikely to be easy.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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9 Comments
Spot on. Thank you.
Might our country be more likely to achieve greater productivity/growth if we negotiated a supply of Russian gas at some quarter the price of American gas?
https://michael-hudson.com/
@Steve: Yes we might well achieve greater growth if we started buying loads of Russian energy (assuming the facilities are still in place for that to be possible). But would you really be comfortable knowing that your prosperity has been bought on the backs of so many Ukrainians killed, tortured, raped, etc.? I know I wouldn’t. Besides, if we bought Russian energy, how on Earth could we legitimately complain about other countries doing likewise? It would undermine the the whole sanctions regime that’s been put in place by so many countries after Russia’s invasion of Ukraine. And if, by doing so, we allowed the Russian economy to thrive again, you can bet Putin will use that new prosperity to throw more resources into undermining the UK and Europe’s democracies and our security – which would cost us a lot in the long term.
@ Steve Trevethan, ” if we negotiated a supply of Russian gas at some quarter the price of American gas”.
I wondered at first whether this was a belated 1st April joke, but I don’t think your suggestion (was it a question or a suggestion ?) will be much appreciated in the Ukraine. One thing I do agree on, there’s too much gas coming from the White House.
Might the so tragically treated Ukrainian people have been horribly mislead?
Has any conflict in or adjacent to Russia resulted in Russia’s defeat?
Were the Ukrainian’s led to believe that they had reliable American support?
Might a realistic, if so sad question be, what can the Ukrainians achieve instead of military victory?
Might reasonable trading relationships be, in practice, more helpful than conflict?
https://www.bing.com/search?q=russian+demands+of+ukraine&gs_lcrp=EgRlZGdlKgcIAhBFGMIDMgcIABBFGMIDMgcIARBFGMIDMgcIAhBFGMIDMgcIAxBFGMIDMgcIBBBFGMIDMgcIBRBFGMIDMgcIBhBFGMIDMgcIBxBFGMID0gENNzY3NTk4NzAwajBqNKgCCLACAQ&FORM=ANAB01&adppc=EDGEE
SS&PC=U531
P. S. Does Europe have the weapons and/or the industrial resources to practically support Ukraine in a conflict of any length?
@Steve Trevethan – “Might the so tragically treated Ukrainian people have been horribly mislead?”
Yes, they believed Putin would adhere to the internationally agreed (including Putin’s Russia) border between the newly independent Ukraine and Russia. They also believed that those who opposed Russian occupation of Europe specifically NATAO and the USA would support them in preventing future Russian expansion and occupation.
The reason why the war in Ukraine has dragged on for so long is because we NATO and the USA have dragged our feet in providing robust support to Ukraine.
>”Does Europe have the weapons and/or the industrial resources to practically support Ukraine in a conflict of any length?”
Well, I remember many decades back it being said that a war in Europe would only last 5 days before it was back to swords and arrows. Given how small the Ukraine front is relative to Europe’s border and the extent to which we (including the US) are struggling to supply Ukraine with sufficient weapons to make a difference, I suggest it demonstrates just how much the Cold War was a game of bluff…
@Steve Trevethan –
>”Might our country be more likely to achieve greater productivity/growth if we negotiated a supply of Russian gas”
Well not at the moment. However, at some point in the very near future there will be a very large amount of methane that will begin to be released from the perma frost, Russia will need international help to mitigate this: burning methane is going to be better for the climate than simply letting the methane vent into the atmosphere.
Steve: ‘Might a realistic, if so sad question be, what can the Ukrainians achieve instead of military victory?’
Their only alternative is to roll over and surrender to whatever terms Putin dictates.
>’Might reasonable trading relationships be, in practice, more helpful than conflict?’
About as helpful as sitting in a circle, singing ‘Give peace a chance’.
We all traded with Russia for decades before the war started. Didn’t stop it happening, did it?
What the public want is some honest explanation of the challenges we face as a nation and what we propose to do about them. We are lucky as the other main Parties do not yet want to embark on this. So we have an opportunity to show ourselves as the Party they can trust to speak candidly about the things that concern them and adopt common sense approaches to solving them.