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

Getty Images.
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Why Labour's dismal poll ratings won't harm Jeremy Corbyn's re-election chances

Members didn't vote for him on electoral grounds and believe his opponents would fare no better.

On the day of Theresa May's coronation as Conservative leader, a Labour MP texted me: "Can you imagine how big the Tory lead will be?!" We need imagine no more. An ICM poll yesterday gave the Tories a 16-point lead over Labour, their biggest since October 2009, while YouGov put them 12 ahead. The latter showed that 2.7 million people who voted for the opposition in 2015 believe that Theresa May would make a better prime minister than Jeremy Corbyn (she leads among all voters by 52-18).

One might expect these subterranean ratings to reduce Corbyn's chances of victory in the Labour leadership contest. But any effect is likely to be negligible. Corbyn was not elected last summer because members regarded him as best-placed to win a general election (polling showed Andy Burnham ahead on that front) but because his views aligned with theirs on austerity, immigration and foreign policy. Some explicitly stated that they regarded the next election as lost in advance and thought it better to devote themselves to the long-term task of movement building (a sentiment that current polling will only encourage). Their backing for Corbyn was not conditional on improved performance among the public. The surge in party membership from 200,000 last year to 515,000 is far more worthy of note. 

To the extent to which electoral considerations influence their judgement, Corbyn's supporters do not blame the Labour leader for his party's parlous position. He inherited an outfit that had lost two general elections, neither on a hard-left policy platform. From the start, Corbyn has been opposed by the majority of Labour MPs; the latest polls follow 81 per cent voting no confidence in him. It is this disunity, rather than Corbyn's leadership, that many members regard as the cause of the party's malady. Alongside this, data is cherry picked in order to paint a more rosy picture. It was widely claimed yesterday that Labour was polling level with the Tories until the challenge against Corbyn. In reality, the party has trailed by an average of eight points this year, only matching he Conservatives in a sole Survation survey.

But it is Labour's disunity, rather than Corbyn, that most members hold responsible. MPs contend that division is necessary to ensure the selection of a more electable figure. The problem for them is that members believe they would do little, if any, better. A YouGov poll published on 19 July found that just 8 per cent believed Smith was "likely to lead Labour to victory at the next general election", compared to 24 per cent for Corbyn.

The former shadow work and pensions secretary hopes to eradicate this gap as the campaign progresses. He has made the claim that he combines Corbyn's radicalism with superior electability his defining offer. But as Burnham's fate showed, being seen as a winner is no guarantee of success. Despite his insistence to the contrary, many fear that Smith would too willingly trade principle for power. As YouGov's Marcus Roberts told me: "One of the big reasons candidates like Tessa Jowell and Andy Burnham struggled last summer was that they put too much emphasis on winning. When you say 'winning' to the PLP they think of landslides. But when you say 'winning' to today's membership they often think it implies some kind of moral compromise." When Corbyn supporters hear the words "Labour government" many think first of the Iraq war, top-up fees and privatisation, rather than the minimum wage, tax credits and public sector investment.

It was the overwhelming desire for a break with the politics of New Labour that delivered Corbyn victory. It is the fear of its return that ensures his survival. The hitherto low-profile Smith was swiftly framed by his opponents as a Big Pharma lobbyist (he was formerly Pfizer's head of policy) and an NHS privatiser (he suggested in 2006 that firms could provide “valuable services”). His decision to make Trident renewal and patriotism dividing lines with Corbyn are unlikely to help him overcome this disadvantage (though he belatedly unveiled 20 left-wing policies this morning).

Short of Corbyn dramatically reneging on his life-long stances, it is hard to conceive of circumstances in which the current Labour selectorate would turn against him. For this reason, if you want to predict the outcome, the polls are not the place to look.

George Eaton is political editor of the New Statesman.