15 November 2016

Labour has finally accepted that Brexit will happen


John McDonnell, the Labour Party’s Shadow Chancellor, gave a speech today. (For those of you that may have forgotten, what with the Labour Party not having said anything of any relevance and barely made the news since its leadership election, the Labour Party is still, just about, a thing.)

It was, as McDonnell’s speeches usually are, a somewhat painful mishmash.

He started off with a long section attempting to re-fight the 2010 general election. At least, I think it was the 2010 general election, though it could perhaps have been the 1983 general election instead.

He told us what a terrible error austerity was, and how George Osborne had damaged the economy and the poor with his heartless Tory policies, focusing his malice particularly upon welfare recipients.

And all for naught! For of course, as John emphasised, George never met any of his fiscal targets.

“As the consensus amongst economists now says,” explained McDonnell, “imposing austerity on an economy battered by the financial crisis of 2008 was self-destructive.”

Let’s set aside that that’s totally not a “consensus” amongst economists – indeed, it’s not even a majority opinion.

Let’s instead imagine McDonnell was right. So is his position that we should go for the policies favoured by mainstream economists?

In which case, first, does recent experience suggest that’s a winning political strategy? And, second, does it really seem wise for John McDonnell, of all people, to go down the path of saying that policies opposed by mainstream economists are by definition a Bad Idea?

Anyway, Labour having lost at least two general elections by saying what a bad idea austerity was, McDonnell is adopting a third-time-lucky philosophy – even though Philip Hammond had already been thinking of moving on from the rhetoric of austerity, via some combination of declare-victory-and-move-on and Brexit-changes-everything.

Ah well. At least you can’t fault McDonnell’s optimism.

Next, the Shadow Chancellor told us how keen he is on operational independence for central banks. Apparently, in his view this is “sacrosanct”.

Yes, central banks setting policy without political input is “sacred, hallowed, respected, inviolable, inviolate, unimpeachable, unchallengeable, invulnerable, untouchable, and inalienable” – despite the Bank of England missing its inflation target almost continuously, in one direction or another, for six years, and despite QE meaning that monetary and fiscal policy are not remotely distinct.

There then came the big surprise of the speech. One might have concluded, from McDonnell’s earlier denunciations of George Osborne, that the economy hadn’t been doing so well.

Not a bit of it! He suddenly announced: “The economy is growing. We can use the proceeds of that growth more fairly.” Sharing the proceeds of growth, eh? I think he could be on to something.

In a brief interlude, we were treated to the deep and controversial insight that “Good business doesn’t need no government. Good business needs good government.”

Then we got to what seemed to be the key section:

“After Donald Trump’s victory – we understand the price for failure. When decade after decade the rich get richer and the ordinary people see their incomes stagnate, something snaps.”

So… Trump won because Obama was too right-wing? (There’s actually a weird sense in which that might actually be true, if you think about it.)

McDonnell went on: “Donald’s Trump victory in America has underlined the point that the old rigged economy working just for those at the top has failed.”

Well, I definitely think that’s at least partly true, and I suspect many CapX readers would agree as well.

What I’d mean by the “rigged economy” is a system whereby rich folk with political power manipulate the system so as to get bailouts, subsidies and regulatory changes that favour them. McDonnell might even agree with me. Where we differ is that I think McDonnell’s “solutions” would make things vastly worse.

Towards the end, McDonnell moved on to Brexit: “They have no coherent plan for Brexit and no coherent vision of how our country will prosper.”

Personally I’m less sure they have no plan than John is – and if they don’t have I’d mainly blame the fact that the UK political system has squandered the last five months in a futile and profoundly counter-productive argument about whether we should actually leave, or whether we should have a second referendum, or deem the referendum advisory, or just chuck our hands in the air and say: “It’s all too hard – let’s think again!”

We desperately need to move on to a settled acceptance that we will actually leave, so we can then debate what we would like the UK to try to do instead of the EU – and then, once we know that, to move on to debate exactly what form we want Brexit itself to take.

McDonnell, to be fair, has tried to do that today, declaring that “We must not try to re-fight the referendum or push for a second vote, and if Article 50 needs to be triggered in Parliament, Labour will not seek to block or delay it.”

He added: “We are insisting on full, tariff-free access to the Single Market for our businesses because this is the best way to protect jobs and living standards here” – which is notably not the same thing as membership of the Single Market.

So if the Article 50 triggering goes to a vote in Parliament, Labour will not seek to block or delay it and will not seek to insist we remain members of the Single Market. Good. That’s settled, then. Can we move on now?

Overall, a rather incoherent ramble which, despite its occasional endearing moments and despite containing a number of perfectly fair critiques (e.g. Osborne didn’t meet his deficit reduction targets, and the US economy is indeed seen by many Trump voters as rigged), won’t add much to the political debate – except perhaps via its comforting words on accepting Brexit.

Labour – feel free to go back to your silent reverie once again.

Andrew Lilico is an economist and political writer.