It was a sad week in post-Brexit Britain. While the Treasury’s and Bank of England’s reckless economic policies have put us on a path to recession and mass unemployment, the public eye and political discourse is stubbornly fixated on the non-issue of illegal immigration.
It also became clear once again, that contrary to some hopes, there is little daylight between Sunak’s government and the two Brexit governments that preceded his. Thus, the ‘new’ government proves to be equally prone to dramatic U-turns as its predecessors. This week, Heaton-Harris announced that there will be no new elections in Northern Ireland, despite his insisting that such an election would be necessary if the Stormont executive collapsed.
There has also been a new case illustrating that Rishi Sunak’s judgements on personnel appointments are equally questionable as those of his predecessors. Evidence has emerged that he knew about Gavin Williamson’s unacceptable text messages to the former chief whip when he offered him a job in the new cabinet. Together with the ongoing questions around his reappointment of Suella Braverman, this casts his claims to integrity and professionalism in a bad light and provide further proof that Sunak like Johnson and Truss is primarily an Egocrat.
Most worryingly, though, the week has also provided more evidence that far from moving the Tory party back onto the terrain of realism and reason, the Kwarteng-Truss mini-budget fallout has convinced those in charge of the party that they need to double down on denying reality. Post-truth’s grip on UK politics seems to grow stronger.
Post truth – The government’s official policy
A couple of weeks ago, I was quite hopeful that Truss’s disastrous Premiership may have opened up a window of opportunity for more reasonable forces to take back control of the government and thus move us away from greatly damaging symbolic policy-making onto territory of moderation and reason. This week’s post-truth politics have proven me and many other commentators wrong.
A seemingly innocuous example of the continuing force of post-truth politics was Michael Gove’s tweet about Free Trade Agreements (FTAs). His tweet claimed that the conservatives have concluded “new free trade deals with over 70 countries since 2016. That’s over £800 billion worth of new global trade.” (Incidentally, in a sign that to him this is all just a big joke, he added in reference to his infamous attack on ‘experts’ that he did not ‘think people have had enough of exports’).
As fullfact.org shows, the conservative party’s claim that Gove retweeted is false in several respects. For one, the FTAs concluded with 71 non-EU countries since 2016 are not ‘new’ in any meaningful sense. The vast majority (69) are simply roll-over deals of FTAs that the UK had with these very same countries as an EU member (in some cases on slightly different terms, e.g. the one with Japan). Only two FTAs are truly new – the deals with Australia and New Zealand.
More importantly, the claim that these deals are worth over £800bn of ‘new global trade’ is completely false. The figure of £800bn is the total amount of trade the UK does with the countries with which it has an FTA. So, this sum is not ‘new trade’ but the overall amount of trade that we currently do with these countries. The FTAs concluded since 2016 have not generated this volume of trade, but – at best – prevented it from decreasing after Brexit. The implied claim in the message, that somehow the conservatives have managed to add £800bn to the UK economy is hence entirely misleading.
Moreover, the figure of £800m includes both imports and exports. Therefore, in some cases an increase in that figure were it due to genuinely new trade deals – e.g. with Australia and New Zealand when they enter into force – may actually not be good news. For instance, the aggregate value of trade may hide patterns where an increase is due to a surge in imported products, which displace UK products. This is a fear UK livestock farmers have repeatedly voiced regarding the UK-Australia deal and the UK-New Zealand deal. Long term, this could increase imports, but actually reduce exports if the size of the domestic livestock farming sector decreases significantly as a result. The total value of trade between the UK and countries that we trade with is therefore completely meaningless in terms of measuring its impact on the health of the UK economy, let alone people’s living standards.
This reification of FTAs by Brexiters is one of the clearest examples where Brexiters successfully use a post-truth strategy to shift the political debate into the realm of purely symbolic policy-making. Concluding FTAs is seen as proof that we have taken back control and that Project Fear was wrong, which is all that matters to Brexiters.
Another example of post-truth politics was provided by Kemi Badenoch the new Secretary of State for Trade. Bloomberg’s Lizz Burden tweeted about a worrying conversation she had with the Trade Secretary where Badenoch launched an attack on the Office for Budget Responsibility (OBR) based on the fact that economic forecasts are never entirely accurate. While none would deny that forecasts are of course rarely 100% correct, the fact that the Trade Secretary derives from that rather banal observation the conclusion that the impact of trade barriers on economic flows is a matter of opinion (‘The OBR has a view, we have a different view’) rather than one of facts and scientific analysis is disturbing to say the least.
More worryingly still, it becomes increasingly clear that the PM himself is no more committed to truth than his far-right cabinet ministers. During Prime Ministers Questions (PMQ) this week, – trying to defend the mess the Home Office is making of the asylum system – Sunak did not hesitate to create a completely false link between illegal immigration and the EU’s principle of Free Movement of People. This is either a sign of great ignorance, or one that the PM himself uses post-truth strategies as a tool to shore up support for the government, while showing no interesting in getting on top of the actual issues at hand.
Immigration: A fabricated crisis
Arguably the most widely-publicised and debate topic this week is the so-called ‘migrant crisis,’ which is probably the most egregious case of post-truth politics in the UK. This week, Home Secretary Braverman tried to convince her target audience that the UK is somehow under assault from an army of migrants ‘invading’ the country. In reality, the number of asylum seekers coming to the UK is relatively low compared to other EU countries, compared to its historic peak (in 2002 there were 84132 applications, which compares to 63089 in the year up to June 30, 2022), and compared to the 133,854 who were granted visas under the Ukraine Scheme, and the 75,764 granted under the Hong Kong scheme. In other words, while small boat crossings should be a concern due to the dangers involved and the impact the mismanaged situation has on local communities, the numbers that arrive in that way are certainly nothing the UK government could not handle were there a minimum of political will and competence. If we can accept more than 200,000 people from Ukraine and from Hong-Kong without any visible problems, surely 63,000 arriving through other channels would be easily manageable for a large country like the UK – which – ironically desperately needs more workers.
So, the ‘migrant crisis’ is 100% a crisis of the government’s own making. The long list of failures include the actions and inactions responsible for the dire situations in the over-crowded processing centre at Manston. This week the Home Secretary was accused by Tory MP Sir Roger Gale of deliberately stopping to book sufficient hotel rooms that would have helped to avoid overcrowding at Manston. Under pressure, the Home Office then started to move hundreds of migrants out of the centre, with some of them being sent to central London where they were left stranded. These cases of neglect and sheer incompetence reflect a deeper the lack of political will in the Tory party to make the system work.
Since Theresa May’s spell as Home Secretary, which turned the ‘hostile environment’ slogan into official policy, successive Tory Home Secretaries have applied a policy that combines inhumane cruelty and disdain for the human rights of asylum seekers with a disdain for the civil service that has undermined the Public Service Bargain (in fact and in rhetoric) and thus the capacity of the state bureaucracy. As so often, here too, Brexit has made an already dire situation worse, most importantly due to the resulting souring of relationships with France that are crucial to stop small boat crossings and the UK’s decision to leave the Dublin III regulation that made it possible to return asylum seekers to the EU member state where they first arrived.
To what extent the fabricated ‘migrant crisis’ is going to help or hurt the Sunak government is an open question. With talk about a ‘migrant crisis’ all over the media, Tories may hope that fear of immigration may displace the economy as people’s main concern and thus distract them from the real issues they are facing. The rationale behind this strategy seems to be: As long as people hate immigrants, they don’t hate the Tories. This will explain why Braverman – following in the footsteps of other Tory Home Secretaries before her - used such inflammatory rhetoric.
Yet, this strategy may start to backfire. The Tories have been in power for 12 years. Blaming Labour for the failings of the current immigration system seems increasingly ludicrous (although David Davis on the News Agent podcast still tried to minimise the Tories’ failure by comparing it to Labour’s record from 20 years ago). Sunak’s intervention at PMQ illustrates how thin the ice is Brexiters are now walking on. In a context where many firms are struggling to recruit workers, using the end of free movement of people as a defence of the government’s record on illegal immigration may simply highlighting the fact that Brexiters have failed on both accounts: Taking back control of our borders and ensuring that the UK labour market remains liquid after Brexit. Short term, vilifying refugees and fabricating new scapegoats – most recently ‘Albanians’ – may generate enough anger among certain groups in British society to continue ignoring that fact. But soon enough, they too will realise that throwing petrol bombs at migrant processing centres actually does not solve any of their problems. Indeed, as I have noted many times before, eventually, reality will catch up with all the lies. To quote once again the astute observation by Hanna Arendt in her Truth & Politics essay that I mentioned in a previous post about post-truth Brexit:
“In their stubbornness, facts are superior to power; they are less transitory than power formations, which arise when men get together for a purpose but disappear as soon as the purpose is either achieved or lost.”
Brexit, the purpose that brought the current power formation together, is all but lost. Indeed, as Chris Grey noted in his Brexit & Beyond blog this week, it is increasingly clear that the Brexit revolution has failed and the public’s attention is increasingly shifting from the wonderful promises to the ugly reality. It increasingly looks like the economic reality Brexiters are creating with their reality-denying ideology is going to be very ugly indeed.
Questionable economics
The disaster that the short-lived real existing Trussonomics has proven to be, may lead some to conclude that Sunak’s fiscal conservatism is a return to a more reasonable economic plan. To some extent that is true. Sunak and Hunt’s economic plans – to be fleshed out on November 17th – will not spark off a major financial crisis, as Trussonomics would have done had it not been for the emergency intervention of the BoE. Yet, the fact that Sunak’s economics are less bad then Trussonomics, does not mean that they are good. Indeed, as the Financial Times’ Martin Sandbu aptly puts it, we’ve gone from Truss’s “tax cuts without the spending cuts, to the spending cuts without the tax cuts.” Therefore, economically, Sunak’s government means a return to old recipes that have not worked in the past. Most importantly, austerity has been disastrous and arguably a reason why the UK has continued to struggle with productivity and economic growth after the financial crisis of 2008. Writing in the Daily Mirror, Prof. Danny Blanchflower and Prof. Richard Murphy, argue that Britain simply cannot afford another phase of austerity. Not only will it depress consumer demand due to reduced household income, but also – as the FT’s Sarah O’Conner argues – does cutting investment in public services mean they become less efficient and therefore more expensive in the long-term.
The situation is made worse by another powerful actor in the UK’s economic policy making – namely the Bank of England. It is increasingly acknowledged that what brought down the Truss government were not ‘the markets,’ but the BoE. Indeed, tensions between the BoE and Truss pre-dated her premiership, as she criticised the banks record on bringing down inflation already during her leadership campaign and questioned the Banks’ independence. Indeed, due to the incompatible goals, Trussonomics meant that there would be inherent tensions between the Treasury and the BoE. Under Truss, the Treasury was stepping on the accelerator, while the Bank was applying the brakes. That is not the case with Sunak’s orthodox economic plan of spending cuts and austerity, which is much more aligned with the BoE’s goal of controlling inflation. Yet, on the flip side, the relative alignment between government and BoE priorities means that both are now acting pro-cyclically pushing us towards recession. In other words, both the Treasury and the BoE are stepping on the brakes. Indeed, Sunak-Hunt’s plan to reduce government spending, keeping taxes where they are or even increasing them, and the banks focus on increasing interest rates to fight inflation all mean aggregate demand will be lower than it would otherwise be.
Prof Murphy has warned for a long time that the BoE’s approach to inflation is misguided.* Increasing domestic interest rates will do very little to reduced inflation in a context where the main sources of inflation are increasing global prices for gas and food, which are largely due to the war in Ukraine. To be sure, increasing interest rates – as the BoE did on Thursday (from 2.25 to 3% - the biggest hike in 30 years) – will strengthen Sterling and thus possibly reduce import price increases somewhat. Yet, overall given the external causes of inflation, interest rates hikes may proof ineffectual to combat price rises. Conversely, they will push the UK economic into a recession, which the Bank warns could be the longest in 100 years and see unemployment double.
In combination, the Treasury’s and the BoE’s economic plans may not be as reckless as Trussonomics was, but they are reckless nevertheless, because they accept the fact that thousands of people up and down the country will be struggling to keep a roof over their head, will lose their jobs, and will face further reductions in public services, while the two goals that Treasury and BoE try to achieve (balancing the government budget and reducing inflation) are of limited importance in the real world. Indeed, on the question of the so-called budget ‘black hole’ that the Treasury so desperately wants to plug, Prof Michael Jacobs convincingly shows that this blackhole in public finances is largely fictional. Similarly, while inflation above a certain level is a problem, it is much less of a problem than mass unemployment, businesses going bankrupt, and people losing their homes. Hospitality firms are certainly suffering a great deal from increased food and energy prices. But given the external sources of these price rises, increasing interest rates (in combination with austerity) will make things worse by reducing demand in a time of continuing high prices.
There are alternatives to the current economic orthodoxy incorporated by the Sunak government and the BoE. Prof. Blanchflower and Murphy mention four: The continuation of quantitative easing (i.e. printing money), the government borrowing directly from people rather than financial markets through government savings accounts, increased windfall taxes on energy companies and banks, and an increase in capital gains tax. Others include a net wealth tax.
Yet, once again, by putting the goal of reducing inflation ahead of keeping people in employment and in their houses, Britain’s economic institutions seem to make the choice of privileging finance over industry like they have done at least since the 1980s. This time, the libertarian leanings of Brexit economics reinforce the pressures to make that choice. A prominent argument for tighter monetary policy among Brexiters is that companies that can only survive on cheap credit are zombie companies that should go bust. That argument has some merit in normal times. In the middle of a multi-crisis that threatens the livelihoods of millions, however, the focus should be firmly on the reality of people’s economic situation, not on the fantasy of market efficiency.
The silver lining
If one positive thing can be said about the current trends in British politics, with the economic pain increasingly felt throughout the country, questions about Brexit promises will only grow louder and voices asking for a change of direction will become more numerous. As Chris Grey very convincingly argued this week, judged on the grounds of economic reality, the Brexit project can only be seen as an abject failure. As the gap between Brexit fantasy and people’s reality is growing, the risk of a ‘mass wish psychosis’ that I wrote about a few months ago now seems rather more limited. Eventually, the tyranny of facts may provide the British democracy a way back to reality.
*The BoE is not the only central bank starting to feel a push back against their prioritising of low inflation over any other economic goal. In other European countries, similar discussions are taking place and doubts about central bank independence are being raised. This may also explains why the BoE was eager to stress on Thursday that while it announced a major increase in interest rates, going forward, it may not have to raise them as much going forward as markets had expect. This, in turn, has led some lenders to signal mortgage rates may fall again in the mid-term.