Will UK voters really vote for the Republican party and our own Donald Trump?

There is so much about today’s Conservative party that is very similar to the Republican party in the US. To establish this, there is no better place to start than our future Prime Minister for the next five years, if polls are to be believed.

Trump and Johnson are both inveterate liars. They lie when they have no need to, just for effect. To take some recent examples. He told Andrew Marr that the Tories don't do deals with other parties, when everyone can remember the Coalition government and the DUP. (Marr, as so often with interviewers, let that pass.) Johnson has said that the extra money he has allowed for the health service is the biggest boost for a generation. In fact it is smaller than the increase in spending from Labour from 2004 onwards. There are many like this. He has lied all his life, and been sacked from jobs twice for doing so. He lies about lying! No UK politician in living memory has lied like this.

A consequence of that is you cannot trust a word he says. When he and his ministers say that the NHS will not be part of any trade negotiations with the US, it means nothing. Brexit puts the UK in a very weak position because the political costs of walking away, while the costs for the US are zero. So of course the NHS and things that affect the NHS will be part of any trade deal.

When he says that he will get a trade deal with the EU in just a year he is lying. It is just not possible given the reasons the Conservatives want to leave the EU. So voters will have to decide which lie he will choose: to break his undertaking not to extend the transition period or to leave with no deal.

Like Trump, Johnson treats the economy, and the consequent wellbeing of everyone in it, as a plaything for his own ends. With Trump this involves imposing tariffs because of his 15th century understanding of economics. With Johnson he chose Brexit on a toss up about what would advance his own ambitions. He then championed the hardest of Brexits because it appealed to those who would vote him leader of his party. But there is a difference: Brexit is far more harmful than anything Trump has managed.

Where Trump wants to increase coal production in the US, Johnson wants to stop any increases in fuel duty. Johnson didn’t attend a leaders debate on climate change.

Johnson, like Trump, is totally lacking in empathy for others, and is only interested in himself. Johnson thought nothing of helping a friend beat up a journalist. His personal life matters because it reflects the kind of person he is.

Like Trump, he has no time or respect for people who disagree with him. He shut down parliament because it was getting in his way. In his manifesto he now threatens to curtail the ability of the law to stop him doing what he and his party want. Johnson and the Conservatives, like Trump and the Republicans, are a threat to democracy.

Like Trump, he and his party want a totally compliant media. They have put so much pressure on the BBC that parts of it now do what they can to flatter Johnson and the Conservative cause. They have threatened Channel4 because they put a block of ice in his place when he failed to turn up to that leaders debate on climate change.

Like Trump, Johnson hates scrutiny. They both would much rather talk to an adoring party faithful than take part in critical questioning. In this election, Johnson has avoided questions from the press as much as he can, has avoided debates, and is avoiding an interview with one of the best interviewers around.

One reason they both hate scrutiny is their inability to concentrate on the details, the kind of details he got wrong such that Nazanin Zaghari-Ratcliffe remains in jail. This is one reason they sent Gove rather than Johnson to do the climate change debate. Johnson is as mentally unsuitable to be Prime Minister as Trump is to be President.

Republicans in Congress with few exceptions defend Trump. Conservative MPs do the same for Johnson without exception, now that the few Conservatives with some attachment to One Nation Conservatism have been driven out of the party. The Republicans never pretend to govern for the whole country, but just for what some of them call Real America. The Conservatives with Brexit have adopted the same policy. A narrow victory for Leave, obtained in the most dubious referendum ever, has become a mandate for the hardest of Brexits, and with a referendum on the final deal ruled out.

Both parties adopt divide and rule tactics, yet play the nationalist card for all its worth. To conceal and distract from far right economic policies designed to help the 1% wealthiest in the population, by a party financed by the even wealthier, they focus on attracting votes from the xenophobic and racist. The Conservatives have seen off the threat from the Brexit party by adopting the Brexit party. It was probably the votes of ex-Brexit party members that helped secure Johnson his leadership.

The Republicans play the race card and the Tories play the immigration card, something they have done since the turn of this century. Once you do that, it is inevitable that you end up with a party leaders who are themselves racist. Whatever you think about Corbyn, it is Johnson who has expressed racial slurs like calling Muslim women letterboxes, talked about black people as 'piccaninnies' with 'watermelon smiles', Nigerians as money obsessed. (Not to mention his homophobic and sexist comments, and his description of working class men as drunk, criminal and feckless, and what he originally wrote about Hillsborough victims and single mothers.)

In the US Trump gets away with his behaviour among many because of his money and fame, and in the UK Johnson gets away with it among many because of his class and jokes. Both are where they are because they were given huge head starts, Trump through inheritance and Johnson through class, and have subsequently had careers which are dotted with failure. But once you see beyond the fame and jokes, they are both authoritarians who see nothing wrong in stoking fears about minorities to get the majority to vote for them, and in abusing the constitution to get their way. You might say that it is Trump not Johnson who is threatened with impeachment, but I have lost count of the legal cases about his actions that have been conveniently postponed for this election.

What too many commentators on this election fail to see is the potential irreversibility of this decline into right wing authoritarian rule. With most newspapers pushing out propaganda for the Conservatives and the BBC successfully tamed, the Conservatives now have a sufficient block to any real scrutiny of their policies or behaviour. In the next five years their manifesto suggests they hope to tame anyone else who gets in their way.

The Conservatives have ensured that enough people in this country see and read want they want them to see and read. Soon we will see attempts to introduce nationwide voter ID simply because it helps the Conservatives. It is wishful thinking to say ‘if only we had another Labour leader they would be miles ahead’ - just remember Ed Miliband who lost an election because the media conveniently decided austerity was good economics. [1]

Next year the people of the United States will have their chance to get rid of the worst US president in living memory. We have the chance to stop our own Trump, Boris Johnson, before he gets five years in which he could do irreversible harm to our economy, our democracy, our union and our civil society. The danger in both countries is that they keep their Trump/Johnson, and get locked into permanent authoritarian right wing rule similar to what we see in Hungary and Poland.

Alarmist? Johnson shut down parliament to get his way! When Brexit fails to be the promised land Johnson has promised and when the UK’s potential fails to be unleashed, who will the Conservatives blame for their own failure? How much will they give away to get a US trade deal? Johnson, like Trump, is in the words of a BBC interviewer in braver times a ‘nasty piece of work’, whose only interest is in helping himself. It says a lot about what the UK has become that he looks like getting elected to be Prime Minister.

[1] Of course there were other reasons Miliband lost. He was unpopular, like every Labour leader over the past 40 years has been unpopular except the one who did a deal with the Tory press. And in the final days he was said to be in the pocket of Alex Salmond, even though the SNP have said they will never put a Tory PM into power so their bargaining strength is zero. The broadcast media went with the Tory's SNP story rather than Labour highlighting the (we now know very real) threat to the NHS. 

In defence of the IFS, and why it cannot tell the whole story

Our own fiscal council, the OBR, is very restricted in what it is allowed to say by the party that created it. As a consequence, it is absolutely essential that we have widely respected bodies, principally the IFS but I would also include the Resolution Foundation and the National Institute (NIESR), that are able to provide good quality economic advice at all times, but particularly before General Elections.

A good example is the Conservative manifesto published last Sunday. Without the IFS, it is quite possible that it would have made extravagant promises on public expenditure and it would have also included some tax cuts. But because the media treats the IFS as authoritative and impartial, this year they will have judged that the political costs of a manifesto like that exceeded the benefits.

So the IFS or something like it is essential. But that does not, of course, mean that it is beyond criticism. Indeed it is essential that such criticisms are made (no one is perfect). There are two types of criticism. The first are specific criticisms: it got this piece of analysis or this particular statement wrong. The second is generic: it is often wrong because of a general failing of some kind. Let me take each in turn

A specific criticism I would make is that Paul Johnson’s initial reaction to Labour’s manifesto was ill-judged in the language he used. He used three words that you will not find in the IFS’s written assessment: colossal and not credible. On ‘colossal’, the written text uses the more neutral words ‘very substantial’. More seriously, he said claims that all the tax would be raised from companies and those earning over £80,000 were not credible.

That gave the media an easy headline. For example The Times wrote “Jeremy Corbyn’s plans to raise a “colossal” £83billion in extra taxes to fund an unprecedented public spending spree are “simply not credible”, the Institute for Fiscal Studies has warned.” The Mail wrote “Jeremy Corbyn's hard-Left spending splurge is 'simply not credible': IFS ridicules Labour leader's claim he can raise £83BILLION in extra tax to fund 'colossal' giveaways JUST from the rich - warning EVERYONE will have to pay”. The Guardian wrote “The Institute for Fiscal Studies, the non-partisan tax and spending thinktank, said that it does not believe Labour’s claim that it will be able to achieve everything it plans with 95% of taxpayers not having to pay any extra in tax”

There are two issues here. The first is about the direct incidence of tax which is how everyone, apart from those with some economics, understands by the question who pays tax. It is just not clear from their initial assessment whether the IFS are claiming that Labour’s numbers on revenues are wrong in any serious way. They don’t dispute the initial figures for corporation tax (I will talk about the longer run later), and welcome the measures for capital gains and dividends tax. Yet most people reading the phrase ‘not credible’ would think otherwise.

There is of course a legitimate question mark about the final incidence of corporate tax. As I note in my earlier post, the empirical evidence on this is all over the place. True, shareholders include pension funds. But none of this in my view justifies the phrase ‘just not credible’ to the tax plans in Labour’s manifesto, particularly as Labour pledge was about initial incidence. Now interviews, particularly in the age of 24 hour news and the resulting requirement for instant reactions, are hard to get right. But nevertheless I think it is fair to say that Paul Johnson, on this particular occasion, didn’t get it right.

Is there a generic problem that the IFS are biased towards the right, or against any kind of radical manifesto. Certainly many on the left think so, but then many on the right think the IFS is in the pay of the EU because it thinks Brexit will do what pretty well all economists think Brexit will do. How you feel also depends on your perspective. If a government in a situation you think is intolerable decides to do nothing, which is a fair characterisation of the current Tory manifesto, the IFS has little to say by way of headlines besides it being ‘remarkable’ (although, as with Labour, they should have mentioned Brexit). On the other hand, the IFS is almost bound to criticise some aspect of any radical plan of the type Labour are putting forward. This just illustrates that the IFS has a very limited remit, and cannot dela with everything that influences social welfare. 

Having said that, I should note some of the things that the IFS did not say about Labour’s plans. They made comparisons with the past when talking about the size of the state under Labour’s plans, but did not (as the Resolution Foundation did do) compare that to other countries. This matters, because the IFS will know more than anyone that with any country with a state run health service the size of the state is very likely to grow over time. In addition in discussing revenue raised from Labour’s tax plans, they failed to discuss the potential Remain bonus which they had already analysed for the LibDems.

Another generic criticism is that the IFS are just bean counters. This is nonsense. For example their point about the incidence of corporation tax is not bean counting. I think the problem is more about how others use the numbers the IFS produce. For example, if you listen to the presentation of both parties’ budgets from 2017 by Carl Emmerson, you will see that they think Labour’s tax projections are too optimistic, but they still meet their fiscal rule with room to spare. Guess which number the media talked about and which they ignored. You could respond that the IFS should take that into account, but how could they do that?

A more credible generic criticism of the IFS is that they do not do macroeconomics. I have in the past made this point. If you listened to the 2017 presentation I linked to above, you will see some discussion (13.02 minutes in) of the supply side of each party’s policies. Labour have a plus (more infrastructure spending) and according to the IFS negatives (higher minimum wage, higher corporation tax, more bank holidays), and the Conservatives have a negative (less immigration), so they assume both parties will have no long run impact on output! Now it is just possible the plus and minuses for Labour cancel out, but just one negative for the Conservatives cannot equate to zero. They also assumed the multiplier from a balanced budget fiscal expansion is zero. They clearly don’t want to do macro.

Does this matter? Yes for two reasons. First sometimes macro has a critical influence on their overall assessment of plans, and as my illustration in the previous paragraph suggests it is not good enough to wish them away. Another example is in their analysis of Labour’s 2019 manifesto, where higher public investment under Labour will almost certainly outweigh any impact of higher corporation tax on investment. It is better to be humble about ignorance than pretend to take it into account and then do nothing, and better still to do something more rigorous on macro. Second, as the media takes the IFS as definitive, it means macroeconomic aspects tend to be ignored, which - as with 2019 - is very unfortunate.

The IFS have a real problem here. Their basic funding is for microeconomic analysis of tax and spending changes, and not for macro. For the Green Budget this year they teamed up with Citi who did the macro analysis. In an ideal world they would team up with a respected think tank that is known for its macro analysis, like the National Institute (NIESR). In the meantime we need to look to the Resolution Foundation, that clearly has macro expertise.

In 2019, many of the key issues are macro, or are not addressed by the IFS analysis. To see that, read the letter in the Financial Times yesterday from scores of economists. Issues of stagnant productivity, lack of real wage growth, regional inequalities, the state of public services and the need for a green transformation of the economy are all key issues influencing peoples’ welfare, are addressed by Labour’s manifesto but are not part of the IFS’s analysis. That does not mean what the IFS does should be ignored - as I suggested at the start it is vital work they do - but just that what they do is not everything that matters to peoples’ wellbeing.

Postscript (28/11/19)

The IFS's full analysis of each party's plans, released today, avoids some of the criticisms I make above. One chart below illustrates exactly the key point I'm making, which is that there are many more important things about each party's plans than whether their tax plans match their spending plans. In this case its Brexit, and it is to the IFS's credit that they showed this.

The chart shows that even though Labour's large investment programme raises debt, as it should do, this is dwarfed by the impact of a possible/likely Conservative No Deal Brexit. 

The Tories will never undo the impact of austerity

One of the impacts of 2010 austerity we saw again last week. Widespread flooding ruining hundreds of homes, and costing a life. Can we say those floods were caused by climate change? Not with certainty, but climate change has made this kind of flooding more likely. Can we say the lack of spending on flood defences under a Tory government made the recent floods worse? Not with certainty, but lack of spending has increased the damage flooding does more generally.

In 2007 the Labour government commissioned from Michael Pitt (no longer available on a government website, but available here) which stated:

“The scale of the problem is, as we know, likely to get worse. We are not sure whether last summer’s events were a direct result of climate change, but we do know that events of this kind are expected to become more frequent. The scientific analysis we have commissioned as part of this Review (published alongside this Report) shows that climate change has the potential to cause even more extreme scenarios than were previously considered possible. The country must adapt to increasing flood risk.”

The Labour government responded to this review by substantially increasing central government spending on flood prevention. It reached a peak in 2010/11, the last year of the relevant spending review. Subsequently the coalition government, as part of its austerity policy, cut back on spending, going directly against the spirit of the Pitt review. (More details can be found in my book, The Lies We Were Told.)

Flooding is a very visible example of what happens when a government cuts back on spending communities desperately need. There are hundreds more. Cutting Sure Start centres leading to growing pressure on the NHS. Squeezing local authorities so they cut provision for young people, together with less police officers, helping the spread of knife crime. Squeezing the NHS and local authority health provision leading to premature deaths. And so on.

Sajid Javid and Boris Johnson want people to believe they have begun to reverse the disaster of Osborne’s cuts. They have plans to return the number of police officers to 2010 levels, which leads to good headlines because the media always neglects to account for population growth, with the odd laudable exception from where the chart below comes.  

The number of GPs per head of population have also been falling in most of the UK, when they should be rising to cope with people living longer. Here is a chart from the Nuffield Trust.

Again the Conservatives have announced plans for more GPs, but they have done that before and they have failed to materialise. The basic problem is that they are failing to train enough doctors, too many doctors go overseas because of poor pay and working conditions in the UK (remember the doctors strike), and their hostile environment policy and Brexit discourages doctors coming from abroad. I could go on and on.

But it is worse. We have to have severe doubts that the Tory spending plans, inadequate though they are, will be fulfilled. There are two basic reasons. The first is Brexit, which I talked about in a recent post. The second is taxes. Tories hate putting up taxes in any way people will notice, and really like cutting taxes. During the austerity period they cut income taxes and corporation taxes. This is simply no longer possible.

The reason why is health spending. The trend in health spending per person, or as a share of GDP, is relentlessly upwards. The trend in the graph above illustrates this. It reflects many things which cannot be reversed: not just increasing life spans but also technical progress in what can be treated, and the fact that the better off we are the more in proportion we want to spend on our health. For a time this upward trend was offset by the peace dividend reducing military spending, but that has come to an end. It has nothing to do with a free at the point of use system being inefficient - in fact the opposite is true.

Both factors, Brexit and taxes, reflect the influence of extreme neoliberalism in today’s Tory party. There are some Brexiter MPs who really just want to return to the days of Empire, or who just don’t get the idea of shared sovereignty, or want to keep foreigners out. But the key reason for the dominance of Brexit in today’s Tory party is a belief that a society free as far as possible of taxes and regulations and state ‘interference’ in the economy is a good society, and the EU is a barrier to that. The same ideology wants to reduce the size of the state way beyond what most of the public wish, and still calls for slashing red tape despite Grenfell and while greatly increasing red tape for trading firms because of Brexit.

Their neoliberalism has become extreme because they have, with Brexit, started working against the interest of UK business. The party of business has become the party that ignores business. The Tory neoliberalism has become so extreme that they think they know what is good for business even though they are told by business that it is disastrous. A former Tory business minister writes “I was aghast that a Conservative government, of which I was a member, had brought the world of business so low.”

Should we be grateful that the Tories have finally agreed to end years of growing cuts and in some areas start to reverse austerity? They really had little choice. I think we should credit the new Chancellor with stopping Johnson announcing tax cuts (at least for now), and for increasing public investment. But for the reasons I have outlined the Tories will never be able to substantially reverse the damage they did with austerity, because they remain wedded to an extreme neoliberal ideology.

Different kinds of fiscal stimulus

Newspaper day. In the Guardian I have a piece that looks at how we should regard any tax cuts that Boris Johnson may announce as part of the forthcoming election. And make no mistake tax cuts are coming (we already know they intend to cut the tax on petrol), because the spending review signalled that the governments rule will change, as Chris Giles discusses in a good article in today’s FT in which I among other economists are quoted. .

In the Guardian piece I argue that tax cuts are a bad idea because in the context of us leaving the EU they will almost certainly produce unsustainable increases in the deficit without much of a compensation in higher output. As I say in the Giles FT article, policies that if unchanged would lead to steady and permanent increases in debt to GDP are not a good idea. That in turn will mean that at some stage either taxes will have to rise or we will be back to austerity.

But why did I also imply that Wednesday’s spending review was to be welcomed? Are not spending increases and tax cuts not two sides of the same fiscal stimulus coin? There is the obvious point that in many areas public spending cuts have gone way too far. But there is a macroeconomic point as well. Spending increases directly raise aggregate demand by the same amount. Things like income tax cuts, particularly if they go to the better off, are largely saved. (A number of around a third is commonly found in empirically studies for the amount actually spent.) So you get less demand stimulus for your money.

According to calculations done in a separate article by the Financial Times, Labour’s likely plans will also raise the ratio of debt to GDP. But if you look beyond the ‘scare’ headline, the reasons are quite different. Labour will still meet its fiscal rule for current spending, but the amount of investment planned could lead to the ‘falling debt to trend GDP’ part of the rule being breached. These calculations need to be taken with a pinch of salt, because they assume the additional investment produces no increase in GDP, and therefore no higher tax take. Even the IFS when they evaluated Labour’s election plans in 2017 allowed additional public investment to boost GDP. Which is just one reason why the FT’s analysis annoyed the large number of economists, including me, who signed this letter published in the FT today.

I didn’t like the FT write up for another reason. It seemed to be designed simply to be one more fiscal scare story. If I had been writing this I would have asked whether, if the policy did in fact break the debt to trend GDP part of the rule because of more public investment, that part of the rule made sense. A company increasing investment would happily increase its debt to sales ratio if it did a lot of investment, as would an individual increase their debt to income ratio when buying a house. Perhaps that part of Labour’s fiscal rule is a hangover from the days when mediamacro thought government borrowing was a bad thing, even when it was additional investment?

That is the key difference between Labour and the Conservative policies. If the debt to GDP ratio rises because of supposedly permanent tax cuts, that leads to steadily increasing debt to GDP and so cannot be sustained. Running public investment at high levels because you are restoring the public capital stock and as part of a Green New Deal may be prolonged but it is not permanent, and temporary increases in debt to GDP to finance investment make sense.

Why a November General Election looks most likely, and why a government of national unity will not happen.

When I wrote this based on Johnson winning a November general election, someone asked me whether it was a prediction or a warning. It was both. I still think it is the most likely outcome..Here are my thoughts that led me to that conclusion, which of course may be completely wrong.  

Putting Brexit to one side, Johnson needs a larger majority to govern. So an election sometime in 2019 seems very likely. It is also clear he wants this to be a ‘people versus parliament’ election, where of course Johnson represents the people and parliament ‘is colluding with the EU’ to block No Deal. He has hit the ground running with various popular measures. So the key question is when in 2019 the election will be.

There seem to be three possibilities.

1. An election before 31st October
2. An election announced before 31st October that takes place after that date
3. An election in November or December

An important factor governing this choice is that Johnson will avoid an election after we crash out with no deal, unless he is completely deluded about what crashing out means. Even if he blames the EU for everything that goes wrong, voters will not take kindly to a government that played down the consequences of crashing out when crashing out turns out to have severe consequences.

This means that if he intends to leave with no deal, his only choice is (1). But he needs a pretext, and that pretext would have to be MPs instructing the PM to get an extension if he fails to agree a deal. He could ask parliament on 19th September to call an election to be held on 24th October, for example, but that would rely on parliament acting very quickly to rule out crashing out. Johnson also misses out on a crowd pleasing budget. It would be odd to base a complete strategy on parliament moving quickly, but nevertheless I think it has to be the second most likely outcome, particularly if he thinks leaving by 31st October is critical in suppressing the Brexit Party vote. .

Leaving this possibility to one side, we can rule out Johnson ignoring an instruction from parliament to extend the A50 deadline, because it involves holding an election during the chaos of crashing out. Which suggests all the talk of governments of national unity is a red herring, but for rather different reasons than Stephen Bush gives here. Labour may still call for a vote of no confidence (VONC), but Tory rebels are likely to vote it down while they pursue other avenues to stop no deal. Corbyn's choice about whether to call a VONC is lose/lose: if he doesn't he gets blamed and if he does and fails it will be spun as Tory MPs not wanting to support a Corbyn led government.  

If we rule out the improbable early election option (1), and we also assume Johnson will not want to hold an election after we crash out, then this means Johnson will accept an instruction from parliament to obtain an extension before 31st October. That would be obtained on the assurance of an imminent general election, and the EU would almost certainly accept this. Johnson gets his people versus parliament election.

This has the disadvantage, of course, that Johnson will have failed to keep his promise of leaving by 31st October, which risks a revival of the Brexit Party. He could respond that he has been forced to do so by an instruction from parliament which it would be irresponsible of him to ignore. His election campaign would be that the EU would have offered an alternative to the backstop, but this was undermined by MPs ruling No Deal out. 

As calling a general election before 31st October to be held after that date (option 2) mixes the task of campaigning with having to ask the EU for an extension, a November election seems the most likely outcome, although far from certain. 

There are another set of possibilities where Johnson really wants a deal, which is based - as Aleks Eror suggests - on something like a backstop for Northern Ireland alone. This is what the EU originally suggested of course, but no doubt Johnson could dress it up as a result of his tough talking, and much of the press would back him up. This leads to the same place. Parliament would reject the deal with the ERG and DUP in the lead, but he could fight an election on this basis and use a victory as a mandate.

If there is a November election, a Johnson victory seems the most likely option, although again far from certain. While Johnson taking over as PM has squeezed the Brexit Party’s support, Labour has so far only received a small recovery in its vote since the European Elections and the Liberal Democrats remain strong. Of course that may change before any election, but I would say the balance of probability is that this will fail to stop many Remainers in key Lab/Con marginals from voting LibDem or Green rather than Labour.

The irony of all this, if I'm correct, is that Johnson is looking to his rebel MPs to stop a no deal Brexit. A failure to do so, if this was accompanied by a failure to negotiate a new deal with the EU, would require either fighting an election after the chaos of crashing out, or Johnson choosing rather than being instructed to get an extension, as May did in March. If that happened then Johnson would suffer the same fate as May, and the Brexit Party would revive. Only in those circumstances might we not see an election in 2019.