Parallels between what to do about Trump and what to do about Farage

 

Much as Starmer’s government has attempted to deal with Farage and domestic right wing populism by bending towards it (some might say falling over towards it), Starmer has tried to deal with Trump in a similar manner. One obvious example is inviting him for a state visit. Another was probably the appointment of Peter Mandleson as US Ambassador.

The reasons for trying to keep on the good side of Donald Trump are obvious. He is effectively the all powerful monarch of one of the two most powerful countries in the world, and getting on the wrong side of him is likely to have significant costs for any smaller nation that does so. Trump’s main weapon for imposing these costs is tariffs. For example, he has imposed 50% tariffs on Brazil because they have dared prosecute a former right wing President who attempted to overturn by force an election he lost.

One problem that is common with both strategies, either appealing to voters attracted to Reform and appealing to or flattering Donald Trump, is that this alienates the majority of your voters who dislike right wing populism. Mandelson’s close friendship with Jeffrey Epstein, and his support for him even after he had been convicted, was unacceptable to UK public opinion, but it meant he had a lot in common with Donald Trump, who also was a close friend of Epstein. This fact also probably meant that Mandelson and Trump had personality traits in common, which again would make the task of flattering and persuading Trump easier. It was almost certainly one of the reasons Mandelson was appointed in the first place. It is probably no coincidence that McSweeney, who is one of the architects of Labour’s attempts to copy Farage on immigration and asylum policy, is said to have been keen in appointing Mandelson.

Mandelson’s support for Epstein was not acceptable to the UK public, anymore than Prince Andrew’s friendship was. I personally have had little time for Mandelson ever since I briefly met him when I was a student. I can also see why much of the media would like to treat Mandelson’s departure in isolation, rather than as anything to do with Donald Trump. But this seems quite wrong, and potentially hypocritical, to me. Mandelson was appointed in good part because Donald Trump had been elected as POTUS. If Kamala Harris had become POTUS, it seems unlikely Mandelson would have got that job.

If you think Starmer’s judgement was bad in appointing Mandelson, then surely you need to address the fact that his appointment was part of a strategy to deal with Donald Trump. You might need to explain why you think Mandelson’s appointment was a mistake, but yet giving Trump a state visit is OK. After all, Trump has not only had a close relationship with Epstein but, unlike Mandelson, seems to have had similar sexual predilections. There is also the small matter of Trump encouraging a coup to overturn the election of the previous POTUS, and generally turning the US into a fascist state.

Are there risks beyond alienating domestic public opinion in the strategy of trying to flatter and appease Donald Trump? I can think of two major additional problems, which again link to problems with following right wing populists on immigration and asylum. The first is that the more the UK government treats Trump as just another POTUS, rather than the dangerous fascist that he is, the more difficult it is to criticise Reform when they copy Trump’s policies. One of Reform’s major weaknesses is that its members, who are getting elected in increasing numbers, actually like and often try to copy what Trump is doing. Most UK voters, by contrast, do not. Explicitly branding Reform as Trump surrogates is a powerful weapon to use against them, but one the UK government has not used because I suspect they worry about Trump’s reaction. The parallel here is how the government, by constantly talking up the issue of asylum or immigration, plays into Farage’s hands.

The second reason is that it normalises Trump in the minds of decision makers and the media as well as voters. An event of far greater importance to the UK than Mandelson’s departure happened this week, and that was Russia firing a large number of drones at Poland. Most were unarmed, so it is highly unlikely that they all wandered into Poland by mistake when their intended target was Ukraine. Poland certainly doesn’t think it was an accident. Instead this looks like a deliberate act by Putin to test the water. The muted reaction from Poland’s NATO allies (as Phillips O’Brien notes NATO could not even call it an attack) together with the remark that it could be a mistake from Trump himself, might suggest to Putin that the water is rather inviting from his point of view.

If Putin did in the next few years try and invade one of the Baltic states, for example, it seems likely that the United States would do what it could to stop NATO responding. The more other NATO country leaders have a mindset that involves trying to placate Trump, the more vulnerable they become to Trump acting as Putin’s inside man. The parallel here is that the more government ministers say that dealing with asylum seekers is one of the most important issues facing this country, the more they as well as voters will believe it. It leads ministers to take actions that do harm to individuals and also to the other goals of government, like increasing living standards.

At the end of the day this is an issue of getting the balance right at any moment of time rather than a binary flip to a policy that does the complete opposite. Europe cannot afford to completely antagonise Trump right now if only because Ukraine needs the modest support the US still provides. Similarly Labour needs a distinctive policy on asylum and immigration rather than one that is completely laissez faire. But as with domestic policy, UK foreign policy towards Trump does seem to have got that balance a bit wrong. The appointment of Mandelson and Trump’s state visit suggest current UK foreign policy is too unbalanced in favour of appeasing Trump.

We desperately need Starmer and other ministers to say that while we need to work with Trump, his values are not the values of the great majority of the British people. This is the same as the need for Starmer and other ministers to fight back against the rising tide of domestic racism and intolerance. If Starmer has advisers who counsel against such a fight back because it might offend Trump or lose a few votes those advisers need to go, because in our current situation they are dangerous. If Starmer and any ministers themselves believe it is best to stay quiet for risk of offending Trump or some voters then I’m afraid they are in the wrong place at a critical time, and should go. And for god sake do something about overseas funding, X and Musk.

Key myths on asylum, immigration and how to take on the far right

 

There are few subjects where the national debate is so contaminated by disinformation as immigration and asylum. Alan Beattie in the Financial Times described this as a millefeuille of falsehood. This list below is not comprehensive (for example it says nothing about one of our leading export industries, teaching students from overseas), but I’ve tried to focus on areas where the public are clearly and grossly misinformed. (More myths here)

Asylum and Refugees

Myth 1. “There is an ‘invasion’ of people arriving in small boats.”

Around 37,000 people arrived in small boats to claim asylum in 2024, which is just under 4% of the total number of immigrants that came to the UK in that year, That is 0.05% of the UK population. Yet from a YouGov poll only 20% of people correctly thought that there were many more immigrants staying legally than illegally, with almost half believing there were more illegal than legal migrants.

Myth 2. “The number of asylum seekers coming to the UK is out of control”

Someone who successfully claims asylum in the UK is at serious risk if they are returned to the country they came from. So the number of potential asylum seekers is completely out of the UK government’s control. All the UK government can do is either persuade asylum seekers to choose another country (see below), or if it was led by Nigel Farage send them back to their possible death. The UK’s actual record in the 1930s is far from good, but no doubt if Nigel Farage had been in power he would have eagerly sent every Jewish refugee fleeing from the Nazis back to Germany.

Myth 3. “Asylum seekers are particularly attracted to UK because we make it easy for them”

In 2023 the UK processed far less asylum claims than Germany, France or Spain. As a proportion of its population, it processes far fewer asylum claims than the Netherlands, Belgium, Denmark or Finland.

Myth 4. “But those coming on small boats are coming here illegally”

If this was the case, everyone arriving by small boat would be arrested and charged with some crime. They are not, because it is legal for anyone to apply for asylum in the UK. They come by small boat because they cannot get to the UK by any other means, and cannot claim asylum outside the UK.

Myth 5. “But most of those claiming asylum in the UK are economic migrants”

Typically many more asylum claims are successful than are refused.

Myth 6. “It costs the government a huge amount to deal with asylum seekers

In one poll, when asked what the three things the government spent most money on, dealing with asylum seekers and migrants appeared as number two in the list. The reality is completely different. The public vastly overestimates the costs of dealing with asylum seekers.

Myth 7. “Asylum seekers live a life of luxury in hotels”

They don’t. It is illegal for asylum seekers to work in the UK while their claims are processed. If their claim is successful, refugees have to find their own accommodation quickly, which can be difficult if they have no savings. There is no law or Government policy that puts refugees ahead of British Nationals in securing social or council housing because of their identity.

There is a reason why we should be concerned about the number of small boat crossings. It is that these journeys are dangerous to those who make them. The only realistic way to significantly reduce this number of crossings is to increase the number of safe routes for asylum applicants.

That these myths persist is partly because the coverage of this issue in the broadcast media is highly biased to the illiberal right, and highly dishonest. People have a right to claim asylum in the UK, and if the UK makes it impossible for most to claim asylum except if they are physically in the UK, then they will try to get here. By treating small boats as a problem caused by asylum seekers or criminal gangs rather than a consequence of the government's policy to deny safe routes (presumably so we don’t have to take our fair share of refugees), the media is dehumanising refugees.

Immigration

Myth 1. “Net migration is rising and is out of control.”

Net immigration fell from around 800,000 in 2023 to around 400,000 in 2024. Yet when people were asked about this, only 8% thought that migration had decreased.

Myth 2. “Immigration makes it more difficult to see a doctor, get places in schools etc”

Immigrants typically improve the public finances. Crucially, reductions in immigration are likely to be assessed by the OBR as worsening the public finances, so any government that cut back on immigration would have to raise taxes or cut spending on things like health or education.

Myth 3. “Immigration creates a housing shortage.”

Of course any increase in population potentially raises the demand for housing. That only becomes a problem if not enough new houses are built. England does have the second highest population density in the EU, but Wales, Scotland and Northern Ireland have far lower densities. The UK has a regional problem, rather than a population problem.

There is a trade-off between immigration and the retirement age. With an ageing population, the costs to the working population of providing pensions and the NHS is likely to become too great without immigration. If immigration was zero, one consequence would likely be a higher retirement age.

Myth 4. “Skilled immigration encourages firms to skimp on training”

There is little evidence of this. Firms that employ skilled migrants tend to do more training.

Myth 5. “Current immigration mostly involves unskilled workers”

The current UK immigration visa scheme is heavily orientated towards skilled workers

Myth 6. “Since we had high net immigration, the economy has tanked. That’s no coincidence.”

Except it is. Study after study tends to show that migration at worst leaves living standards unchanged, and may improve them. The US economy before Trump had high levels of immigration, and is one of the most successful economies in the world.

How to deal with a right wing focus on immigration and asylum

Myth 1. Get close to the right wing position

This idea comes straight from the simple political science spatial model of ‘triangulation’ or ‘accommodation’, and appears to be the approach the current UK government is following. But this model ignores voters’ perceptions of competence and trust. Quite simply, if two parties are similar but party A is in power and has failed to achieve voters’ objectives while party B has made this issue theirs, voters will tend to choose B. The simple spatial model also typically assumes that those voters that the triangulating party has moved away from will still vote for that party (as the lesser of two evils) rather than vote for another party or not vote at all.

Which is why empirical academic research, as well as experience in other countries suggests it is a bad idea for social democratic parties to try and ape the populist right. Current UK experience suggests exactly the same.(Paper here.)

Myth 2. Just get numbers down.

As I noted above, the government cannot control the numbers of people wanting to claim asylum in the UK, and since Brexit it has become more difficult to get other countries to take them instead. It is possible to limit immigration visas or overseas student numbers, but generally that involves a clear economic cost which will also influence government popularity, which is why successive governments haven't tried to do this. 

The pressure coming from the populist right, together with headline polls, may convince ministers that reducing immigration is worth almost any economic cost. But headline polls are highly misleading because they suggest numbers can be reduced costlessly. They are like polls about reducing taxation without mentioning public services. When voters are asked about whether immigration into particular jobs should be reduced, far more prefer current or higher levels of immigration.

In addition, if the disinformation evident in the current public debate tells us anything, it is that getting actual numbers down does not translate into a public perception that things are getting better. Whatever net migration numbers settle down to, the right wing chorus will be that this is too high, and the same is true for small boats.

The alternative to the two strategies above is to develop a distinctive position on both issues, that is not copying populists and which is not about getting numbers down. That distinctive position should be based on what voters say when they are asked questions beyond the simplistic up or down one. When asked, an overwhelming majority of people want to attract the best and the brightest people, even if that increases immigration. A majority also favours immigration if it improves the economy, or reduces skill shortages, or to staff the NHS. A distinctive position would centre on these trade-offs, to make clear that promises to reduce immigration made by other parties were either empty or would be highly damaging if implemented. 

A sensible immigration policy would focus on the causes of high immigration rather than simple numbers, and it would recognise that the UK has an moral obligation to take its fair share of refugees. One of the reasons the myths described above continue to be believed by so many people is that the facts are ignored by most politicians and most people in the media. Some have a motive to ignore reality, but others do not. 

The real fiscal concern should be a populist government

 

Scare stories about UK fiscal policy seem a regular occurrence nowadays. The latest is the idea that the UK might have to go to the IMF for money. It’s nonsense of course. The UK government cannot run out of money because it can create reserves, just as it did when the world’s bond markets dried up at the start of the pandemic. Current levels of debt to GDP rose a lot because of the Global Financial Crisis, austerity and the pandemic, but it is still below levels between 1917 and 1960.

But, as is often the case, there is a grain of truth in the recent concern. Inflation is coming down slower in the UK than in the US and Europe (although tariffs and deportations mean inflation is likely to rise again in the US.) That is one reason why interest rates on government debt remain pretty high in the UK.

While current (end August) rates on UK 10 year government bonds are 4.7%, for the US they are 4.2%, France 3.5% and Germany 2.7%.

This matters partly because it means the government has to pay these higher rates on the debt it issues, and higher debt interest payments mean either higher taxes or less money for public spending. (My own view is that it should be higher taxes, because most of those higher interest payments are going to UK individuals or institutions.) It also matters because other long term interest rates in the economy are influenced by bond rates, so higher bond rates mean higher mortgage rates, a higher cost of firm borrowing and so on.

The rates shown above are for 10 year government bonds. (If you buy them now, you get what you paid back in 10 year’s time.) One interesting feature of UK government debt at the moment is that interest rates rise the longer the maturity of the debt. The current interest rate on UK 30 year government debt is almost a full percentage point above the 10 year rate. Now that is not completely unexpected. Investors normally need something a bit extra to lock their money away for a long period, or risk having to sell in a volatile bond market.

However, the additional interest on a 30 year bond compared to a 10 or 3 year bond has been increasing recently. There are a number of possible reasons for this. One is global uncertainty, caused in particular by the antics of Donald Trump. In times of uncertainty people like to stay flexible, which in financial terms means staying liquid and avoiding long term commitments. The rise in 30 year bond rates relative to 10 (or less) year bond rates appears to be a global phenomenon.

Other specifically UK factors could involve supply and demand factors, plus some reason why arbitrage breaks down (such as the long time frame to make any profit.) One of these is the Bank of England selling off its stock of government debt built up under the Quantitative Easing programme. (Whether the Bank should be unwinding QE right now is another matter: see Carsten Jung of the IPPR here, for example.)

But there is yet another potential factor that should be raising bond rates in the UK beyond the short term, and that is the threat of a populist government. There are three reasons why the prospect of a populist government should lead to higher interest rates on longer term government debt. The first is central bank independence. Populists (by definition in the way I use the term) don’t like institutions that are independent from them yet that can take decisions that influence them. Populists also often (but not always) take stupid economic decisions, like cutting interest rates when inflation is likely to rise.

That matters a lot for anyone thinking about buying a government bond whose value is fixed in nominal terms (as most are). A period of inflation will reduce the real value of that bond, so anyone buying that bond will require a higher interest rate to compensate for that risk. Trump is a good example here. He has explicitly said that he thinks interest rates should be lower because the economy is booming (in his view), which is an idea that would help you fail a first year undergraduate economics exam. At the moment an independent central bank controls US interest rates, but Trump would like to replace the current decision makers with people who would do his bidding (effectively ending US central bank independence).

When Trump attempted to fire Lisa Cook, a central bank governor, under some fabricated pretext, this was seen as him stepping up his attempt to take control of the US central bank. The reaction of markets followed the analysis above. Rates on short term government debt fell, because Trump wants lower rates. However interest rates on longer term US government debt rose because of the prospects of higher inflation (coupled with the fact that someone at some point would raise interest rates to bring that inflation under control.)

The second reason bond markets should really worry about a populist government is default. A normal government in the UK or US would never choose to default, because the political costs of doing so far exceed the cost of servicing the debt. In addition, as noted above, a UK or US government cannot be forced to default. A populist government is, however, another matter. It is much more conceivable that a populist in power might choose to default on the government’s debt, although reducing real debt through higher inflation is still more probable. Even a very small chance of default would require significantly higher interest rates on government debt to compensate, as we saw in the Euro crisis.

The third reason why populist governments are likely to lead to higher interest rates on government debt is that they tend to make economic promises that can only be reconciled by higher budget deficits. Higher deficits will tend to raise interest rates not because they raise the chances of default (although see above) but because they add demand into the economy, which requires higher rates to offset its impact on inflation.

The example of Trump does raise an issue, however. Given his clear threats to central bank independence, the fact that he has flirted with the idea of partial default in the past, and that he has increased the deficit by giving tax breaks to the rich, why are interest rates on US government debt not even higher? One answer is to say the US is special, and there will always be an international demand for US government debt. Paul Krugman has a different answer, which is that markets typically discount the chances of a crisis until it is almost upon us.

In what is now the constant drip of scare stories about UK fiscal policy, there are two types. The first is pure wishful thinking by the (far) right. Here is Allister Heath of the Telegraph, thinking an impending debt crisis will force an early General Election. These are often the same people who thought Truss’s budget was wonderful.

The second and more interesting group involves more reputable and well intentioned economists, who sometimes raise legitimate issues. But there is always a danger for economists, which is that they focus on the economic details while ignoring the big political elephants in the room. If you are worried about levels of debt or debt interest in the UK and want to see debt to GDP falling, then focusing on fiscal rules or institutional fixes is not going to achieve very much as long as two big political hurdles remain in place.

The first elephant, as I have already mentioned, is the possibility, perhaps probability of a right wing populist government taking power in the next decade or so. Not only will this government probably ignore or cast aside any fiscal rules or institutions, they are also likely to greatly increase deficit finance simply for their own political gain. Under a right wing populist government, current worries about UK fiscal sustainability will look rather ridiculous.

The second, which is related to the first, is that in the UK any alternative to a populist government seems unable to raise taxes on income. Calling this cowardice by these governments misses the key point, which is that there is a general political belief that not pledging to keep current tax rates on income constant has a significant electoral cost. There are two possibilities. The first is that this belief is wrong. The second is that we have a political/media system that allows enough voters to believe that they can have both lower taxes and higher public spending. More needs to be done to show that if we want a level of public services similar to our Western European neighbours, we need to stop having a lower level of taxes than our Western European neighbours.