Thatcher 2.0 needed: Can voters even handle the truth?

This is Iain Martin’s weekly newsletter for Reaction subscribers.

There was an interesting moment towards the end of the latest edition of BBC Question Time, the show where angry members of the public shout at the political class and the desperate politicians repeat back the public’s talking points to gain applause and escape a televised mauling. My friend and former colleague Fraser Nelson had returned to his home town of Inverness to take part as a panelist.

From the audience the demands for more spending on everything were almost endless. Only a few poor souls demurred. Everyone in the public sector is being worked to the bone, it was said, as though the rest of us aren’t working hard, millions often without decent pension provision.

The NHS and other public sector employees kept the country going during Covid we were told, and now need pay rises to match inflation. As usual, there was little mention of the private sector delivery drivers, supermarket teams, farmers, importers and others who kept the food supply flowing and commerce functioning during the crisis. All taken for granted.

Inevitably, the question of public sector pay rises and their relationship to inflation came up. The host Fiona Bruce asked Fraser: what would you do? He explained the complexity of the situation, and then said he was glad he didn’t have to make the tough decisions, because the terrifying truth was the authorities had let the inflation cat out of the bag and now there are no easy answers.

There was silence. Maybe the audience was stunned, or perhaps some were baffled because Fraser had said something they don’t hear from most of their politicians.

Inflation, understanding it, explaining the moral consequences and painful choices involved, is not something the public or our leaders have had to factor in for a quarter of a century. With a few exceptions, it’s not in the intellectual or rhetorical armoury of the leadership class.

Fraser was presenting the Question Time audience and voters more generally with an uncomfortable truth. Having grown so used to being lied to, and told for many years that everything will be okay because there is no problem the government cannot fix, there is something approaching astonishment when anyone dares point out the causes of the inflation crisis.

And no wonder. Only occasionally in the last quarter-century were there inflationary blips, and they were no more than that. Generally, all public conversations about resources and spending could operate on the assumption that prices (unless they were the prices of houses) would rise only a little. Inflation ticked along at about 2%.

When inflation was low it was fashionable to say this vindicated the decisions to make central banks, who set rates, independent from political control as Gordon Brown did. Although that was a factor, what seems more likely, although economic historians will argue about the extent to which this is true, is that globalisation and the development of countries such as China provided a flood of cheap goods keeping prices down.

Outside of the luxury sector, where price is supposed to indicate exclusivity, the price of a t-shirt or jeans now made in China, Malaysia or Vietnam hasn’t really changed in two decades.

That lost world and all its comfortable assumptions is now in ruins. Trade continues, of course, but such is the disruption to supply lines and shipping from Covid lockdowns in Asia that it is much more difficult. Go online and try to order a pair of chinos or similar this weekend from a big brand and you’ll see what I mean.

Much worse, there’s the inflationary disruption from war and the havoc it is playing with energy markets and food production. This has barely started. Still, it is fashionable on television news networks to get some irate climate activist on screen to say governments should not sanction any more fossil fuel use or development.

This is witless when we’ll obviously need a lot of fuel, energy, to keep the lights on, industry functioning and people warm and alive this winter. It may well make sense over time to become more energy efficient, to decarbonise and pollute less. It’s not a process that can be completed by this winter or any time soon. We still need gas and oil and will do for a long time.

The brutal reality, is that this winter if, God forbid, it is especially cold, and poor and elderly people are dying for want of heating, few will welcome a lecture from Greenpeace or the “End Oil Now” movement. There will be public anger that there isn’t enough energy and the government and industry will get the blame for creating too little storage.

Covid plus war, plus the energy crisis, and in Britain a bit of Brexit, equals high inflation.

There is another cause and it is what Fraser was referring to primarily. It is not that excessive money-printing, or QE, is entirely to blame for inflation, but it’s a major component. The splurge central banks went on clearly went too far. The policy was designed to keep the show on the road, and when combined with ultra-low interest rates, it did so.

At the time this policy was popular, other than with savers, to the extent that it was understood, because keeping the show on the road tends to be popular with humans, who are optimistic creatures.

The authorities overdid it, undertaking too much money-printing. The results have included further inflating a dangerous housing bubble that comes with catastrophic social side effects.

Paul Johnson of the IFS pointed out this week that the number of middle-income 25-34 year olds owning their own home was two thirds in 1997. It plummeted to barely a fifth in 2017 and will have got much worse during the latest madcap boom.

Belatedly, the Bank of England has started to increase rates, albeit not as aggressively as the US Federal Reserve.

The concern is sharp rises will only kill the recovery, although the recovery has already slowed to a crawl and we may be in recession or close to it already. This is when companies start shedding jobs, reducing head count to deal with reduced demand.

It is a spectacular mess, made worse by the government hiking taxes and squeezing businesses and individuals already hard pressed.  

This is an environment in which the absence of coherent leadership is a national tragedy, although the UK is not alone in having leaders ill-equipped to deal with this economic nightmare.

It wasn’t always this way, and I’m not referring to the Tony Blair religious revivalist “Save Britain” conference this week, although at least Blair is trying.

No, the BBC is currently showing a rerun of its Margaret Thatcher documentary – Thatcher: A Very British Revolution. This week it was part four and Thatcher was in the mid-1980s and starting to become imperious and paranoid. Even so, what a contrast with today. The level of seriousness. The cast of characters. There are plenty of criticisms that can be made of Thatcherism. My goodness, she knew what she was about though.

Would the public, or enough of it, even listen to such a message if any leader enunciated it today? The Scots in particular would go even more wild with fury. Could the voters handle the hard truth that the only way out is combating inflation, unleashing economic dynamism to create growth, reforming public services, securing energy supplies and rearming properly to combat threats abroad?

Maybe, said a friend this week, the country and the West has to go through this difficult experience first, and only then having learned the hard way will someone new emerge to tell it straight. Let’s hope it isn’t too painful in the interim.

My tip for Margaret Thatcher 2.0, although there are several others in prospect, is Kemi Badenoch MP, MP for Saffron Walden and Minister of State for Levelling Up. She was born in Wimbledon and has Nigerian heritage. Her first job was in McDonald’s during her A-levels. She studied computer engineering and worked in financial services. She is calm, charismatic, reasonable, realistic and 42.

Nicola’s neverendum

The SNP completed its descent into populist madness this week. The First Minister Nicola Sturgeon, dubbed Wee Krankie by uncharitable but clear-sighted critics, unveiled her bizarre plans to continue pursuing relentless chippy divisiveness as the central policy plank of her failing administration.

Unable to force the UK government to grant a referendum (there was one lost by the SNP only eight years ago) she is taking the British government to the Supreme Court (the one in London, not Washington) to cause trouble. The power on granting a referendum is retained to Westminster, but Sturgeon must do something legal-sounding to placate the wilder fringes of the Nationalist movement.

Then she announced she will unilaterally make the next general election a “de facto referendum” on independence.

There is no such thing. A party cannot redefine an election, with multiple candidates and myriad motivations for voting, as a referendum and make it true just because it says so. This is Donald Trump stuff.

When Professor James Mitchell, one of the leading constitutional authorities in Scotland, pointed this out he was dismissed by Sturgeon and attacked by cybernats online.

I can remember a time when James Mitchell was revered by leading Nationalists. He was pro-devolution and listened to respectfully by senior Nationalists in the late 1990s and beyond.

Not now. The SNP Mitchell chronicled no longer exists. Via Alex Salmond and now Sturgeon it has become Trumpified, much more than Boris Johnson ever was.

Changes at Reaction

I’m delighted to announce that my colleague Maggie Pagano this week was appointed editor of Reaction, the site I co-founded in 2016. Maggie is a brilliant journalist and she leads a terrific team of editors and writers.

My weekly email for subscribers is unchanged. I’m Publisher and CEO of Reaction. I’m spending more time on the Engelsberg Ideas project we help run and on the defence conferences we are hosting.

I’m sure you’ll join me in wishing Maggie all the best as she develops and grows Reaction. Don’t hesitate to give us your feedback.

Strolling Bones

To Hyde Park, last Saturday, to see the Rolling Stones in concert with my son. I’ve seen them so many times in the last four decades that I was prepared to be bored. When Keith Richards sang the poignant ballad Slipping Away at Twickenham Stadium in the late 2000s it felt like the end, and I shed a tear that night. I was wrong. They are still going strong and last weekend was the best I’ve ever seen them play. Really.

Why were they so good? I can say this because there are few bigger fans of Charlie Watts, their late drummer, than me. Watts was a jazz drummer, in spirit and technique, though on Gimme Shelter in 1969 he virtually invented the modern rock sound. There was a looseness, a swing, to his playing that meant sometimes it sounded as though the whole thing would topple over. The band became ever more loose in later years, an inevitable function of ageing. Mostly it worked, and occasionally it didn’t.

Charlie’s replacement, and they were friends, I think, is Steve Jordan. Keith Richards fans know him as the key collaborator with Keef on his solo work. His approach on stage is very different, not better, just different, from Watts even though Jordan also uses a small kit, the key to good drumming. The Jordan style is absolutely nailed on, loud, sharp, the snare sounds like a rifle-crack. He’s given the Stones a whole new lease of life.

Have a good weekend.