Why UKIP's right wing economics won't appeal to the city

They're far too simple.

“The government has NO money!!!” – so erupted a speaker at a lunch at the House of Commons, and he brought down his fist so hard on the table the water glasses bounced into the air. As they landed, even I received the message that this was someone with a sense of conviction.

To be fair this wasn’t the first time I had come across Professor Tim Congdon: he was one of the first people to warn of the impending problems in the UK economy in a 1987 Channel 4 opinion piece just at the time when everyone else was congratulating themselves that the Thatcher government had achieved the holy grail of a deunionised, free market economy based upon borrowed money. People had been persuaded that everybody could be materially equal as long as you were up to your neck in debt but Congdon was intent on pricking that particular bubble. Much to everyone’s annoyance, he was right.

Fast forward some time from the tub-thumping House of Commons moment and Congdon is standing for the leadership of the UK Independence Party (UKIP) against Nigel Farage. He loses, but in the process has imbedded himself deeply into the early intellectual base of the party, mainly because he is usually right on economics. His main area of interest is how money dictates inflation. Or, more to the point, how the growth of borrowed money dictates inflation: the more borrowed money there is, the more inflation there is. It seems a self-evident truth but some are apt to violate it from time to time. The departure from this mantra led Congdon to become disappointed with Margaret Thatcher in the latter years of her premiership. Unforgivably, inflation had hardly changed, at some 10 per cent, at the end as at the beginning of her premiership, because according to Congdon she ignored the law of controlling broad money supply  – it was a betrayal of his principles.

Congdon is famously unforgiving to people who contradict him on economic matters, especially when he believes himself to be uncontrovertibly right. But it isn’t out of a sense of hand-wringing fear that one wonders why he is so absent in UKIP’s public statements on economic policy even though he is officially UKIP’s economics spokesman. Perhaps even more interesting, why there are no economic policies on UKIP’s website? There is a long exposition on their position on tax, written by Godfrey Bloom MEP, but that is all. Bloom laces his text with classical references from Adam Smith through David Ricardo, Arthur Laffer and the Regan/Thatcher nexus. You get the feeling Aristotle is missing merely because there wasn’t enough room.

There are some economic principles within Bloom’s thesis: an acknowledgement of the UK’s chronic debt position, recognition of the rising UK interest bill and the desire to reduce taxes to increase the tax take. There is also the claim of being able to reduce government expenditure by £90bn a year without touching front-line services, including defence. There is advocacy of low and flat taxes and the idea that people are better than governments at spending their own money. If you shut your eyes and had it read out loud you would be forgiven for confusing it with a Conservative Party political broadcast (particularly if you left out the stuff about Europe but even that is beginning to harmonise).

What UKIP appeal to is what they would call common sense economics. They are “sound money” advocates: they see the economy like a PLC or a household. They certainly don’t advocate policies that would put them in the camp of those who would use that last hiding place of failed economic policy – currency devaluation – as a tool for economic management. The economist David Blanchflower would be shaking his head in disbelief at this omission, as though – in a famous similie -- they were going onto a golf course with only a driver and a putter in their bag.

On the surface you could be forgiven for assuming that if the UKIP economic thesis, such as it is, could be brought together into something with specific implementation points, there would be many in the clubs up and down Pall Mall and the wine bars of the City of London nodding in agreement with the principles evinced. But this forgets that proper capitalists don’t necessarily want sound money policies: they may welcome low taxes but in capitalist societies all profits are financed through a lavish debt cycle which is the antimatter of sound money and, by extension, of Tim Congdon. Rapacious and calculating capitalists beset by cold ambition for profit would rather see a party in power which lets society at large flash the cash than one that saved up for an indulgence sometime in the future. So to say that the City, or business generally, would automatically welcome UKIP on the basis of ostensibly right-wing policies is too simplistic.

The right isn’t synonymous with capitalists and capitalism isn’t synonymous with financial temperance. In fact, arguably, the opposite is true and may be what is needed in the future. UKIP have a problem.

Nigel Farage. Photograph: Getty Images

Head of Fixed Income and Macro, Old Mutual Global Investors

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.