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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Philip Hammond's house gaffe is a reminder of what the Tories lost when David Cameron left

The Chancellor of the Exchequer's blunder confirmed an old fear about the Conservative Party. 

Philip Hammond got into a spot of bother this morning describing the need for a transitional agreement with the European Union by comparing it to moving into a house, saying: "you don't necessarily move all your furniture in on the first day you buy it”.

This immediately surprised a lot of people, because for most people, you do, in fact, move all of your furniture in on the first day you buy a house. Or rent a house, or a flat, or whatever. Most people who buy houses are part of housing chains – that is, they sell their house to raise some of the capital to buy another one, or, if they are first-time buyers, they are moving from the private rented sector into a house or flat of their own.

They don’t, as a rule, have a spare bolthole for “all their furniture” to wait around in. Hammond’s analogy accidentally revealed two things – he is rich, and he owns more than one home. (I say “revealed”. Obviously these are things you can find out by checking the register of members’ interests, but they are, at least, things that are not immediately obvious hearing Hammond speak.)

That spoke to one major and recurring Conservative weakness: that people see them as a party solely for the rich. Focus groups conducted by BritainThinks consistently showed that when people were asked which group of TV families might vote Conservative, the only one that people consistently picked were the “posh couple” from GoggleBox.

David Cameron’s great achievement as Conservative leader was in winning two elections – the first, in 2010, the most successful night for the Conservatives since 1931, with 97 gains overall, the second, their first parliamentary majority for 23 years – despite being a graduate of Eton and Oxford leading a party that most voters fear will only look out for the rich.

He did it by consistently speaking and acting as if he were significantly less well-to-do than he was. Even his supposed 2013 gaffe when asked what the price of bread was – when he revealed that he preferred to use a breadmaker – projected a more down-to-earth image than his background suggested His preferred breadmaker cost a hundred quid and could easily have been found in any upper-middle class home in any part of his country. One of Cameron’s great successes was in presenting himself as an affable upper-middle-class dad to the nation, when he was in fact, well-to-do enough to employ a literal breadmaker had he so chosen.

This is slightly unfair on Philip Hammond who went to a state school in Essex and is by any measure less posh than Cameron. But his gaffe speaks to their big post Cameron problem (and indeed their big pre-Cameron problem) which is that while many conservative ideas are popular, the Conservative Party isn’t. Most of their big politicians are a turn-off, not a turn-on.

And until they can find a genuine replacement for David Cameron, miserable results like 2017 may become the norm, rather than the exception. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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