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The Osborne audit: what have we learned?

Ahead of this week’s budget, the economic historian Robert Skidelsky examines how four years of austerity have affected Britain.

George Osborne by Ralph Steadman

On Wednesday, for the first time in four Budgets, George Osborne will be able to claim plausibly that Britain has come out of the Great Recession. Growth was 1.8 per cent in 2013 and is expected to be between 2.4 and 2.8 per cent in 2014. That’s the good news. The bad news is that the economy is still 1.4 per cent smaller than it was in 2008 and 14 per cent smaller than it would have been had the recession not struck.

That lost output, amounting to £210bn, is gone for ever. Every household is almost £2,000 poorer on average than it would have been; the government’s revenue is £70bn less – that is (say) 70 hospitals, 1,000 schools and 250,000 housing units not built. Or, to take another number: 650,000 people now unemployed would have been in employment.

This is not all. Every year of the recession has reduced our growth potential. Economists use the word “hysteresis” to describe the rusting away of economic resources through misuse or underuse. Hysteresis has to do not just with the output lost during the slump but with the potential output lost in the subsequent period of near-zero growth. Headline unemployment is an incomplete measure of such rusting, because it also occurs when people work less than they want to, or are in jobs below their skill level, or just leave the workforce. A physics graduate may be able to find employment as a taxi driver or waiter. But how much physics “potential” will he retain after years of doing such jobs?

These are heavy costs. Just as George Osborne did not cause the recession, he has not caused the recovery. Intertwined economies usually fall and rise together, and Britain has been lifted off the rocks by the global upturn. Yet policy does make a difference – to the speed of recovery, its strength and its durability. On all three counts, the Chancellor’s policy is open to severe criticism.

Fiscal austerity slowed and weakened the recovery; monetary looseness ensured that it would be highly unbalanced and therefore fragile. Significantly, the official independent watchdog, the Office for Budgetary Responsibility (OBR), in its December 2013 Economic and Fiscal Outlook, judged the “surprising” growth surge of the past year to be “cyclical . . . rather than indicating stronger underlying growth potential”. That the bank rate needs to be kept near zero shows that the economy is still on life support. 

Missed budget targets

Let’s start with the targets Osborne set himself in his first Budget of June 2010. He inherited a prospective deficit for 2010-2011 of £149bn, equivalent to 10.1 per cent of GDP. He promised to get this down to £20bn, or 1.1 per cent of GDP, in 2015-2016, mainly through spending cuts. By 2013-2014 the deficit should have been £60bn. In fact, it is projected to be £111bn, or 6.8 per cent of GDP this year. Now the Chancellor must cut spending by another £62bn over the next four years to meet his original target, two years later than promised.

There were no growth targets – those were abandoned years ago – but there were growth forecasts. Fulfilment of Osborne’s budgetary targets depended on the economy growing at 2.3 per cent in 2011, 2.8 per cent in 2012 and 2.9 per cent in 2013. In fact, the growth rates achieved were 0.9 per cent in 2011, 0.1 per cent in 2012 and 1.8 per cent in 2013. In other words, Osborne’s failure to meet his deficit targets was caused by the failure of the economy to grow to expectation.

The official explanation for this failure is “bad luck”. In familiar language, policy was “blown off course” by unexpected events. Chief of these was said to be the eurozone sovereign debt crisis, which started with fears of a Greek default in March 2010 and then spread, by contagion, to Ireland, Spain, Portugal and Italy. For the next three years the eurozone slumped almost as badly as Britain. The eurozone slump, it is argued, stymied the British recovery.

There are two things wrong with this. First, with its own currency and control of its exchange rate, Britain should have done better, not worse, than the members of the eurozone. Second, although the eurozone financial crisis undermined confidence, and hit British exports, the European slump arose in part because European finance ministers were pursuing exactly the same policy as was George Osborne. So it makes more sense to say that the coincident slumps of the eurozone and Britain between 2010 and 2013 were the effects of a single cause: the policy of cutting public spending. The “unexpected” element in the situation was the failure of so-called fiscal consolidation to deliver growth.

Why should anyone expect a policy of cutting public spending in a recession to produce growth? It is counterintuitive. A recession is caused by businesses and households spending less. If the government also spends less, one would expect this to worsen, not reverse, the recession. This, I think, is exactly what happened.

Making the case: George Osborne on his first Budget Day, 2010

Primitive economics

Over the past four years, I kept asking myself: what did Osborne have to believe to convince himself that cutting government spending was necessary to “get the economy moving again”? His core belief, I concluded, is ideological. This is that state spending is heavily wasteful. From this, it follows that the smaller the share of GDP spent by the state, the larger GDP will be, because the private sector allocates resources more efficiently. It’s as simple as that.

This ideological fundament generates three seemingly common-sense, short-run propositions, which I call “primitive economics”. The first, known by the cognoscenti as “real crowding-out”, states that if the government commandeers an extra quantum of “real” resources such as workers and factories this will deprive the private sector of their use.

Second, there is the idea of “financial crowding-out”. If the government borrows additional financial resources (money) to fund its spending, this will force up interest rates and oblige businesses to pay more for their money.

Finally, there is “Ricardian equivalence”. This says that government borrowing is just deferred taxation. Expecting to pay more taxes tomorrow, people increase their savings today. So increased government consumption “crowds out” an equivalent volume of private consumption.

Eighty years ago, John Maynard Keynes pointed out that this trade-off view of the relationship between public and private spending may be valid at full employment, but is quite wrong in a severe recession.

In such a situation, extra government spending does not necessarily “crowd out” real resources. Where there is slack in the economy – the labour supply exceeding labour demand as today – extra government spending can bring into use the idle resources by creating more employment. There is no displacement; the public spending is not done at the expense of private spending. Rather, the public spending compensates for a lack of private spending.

Second, it is not true that whatever the government borrows is a subtraction from a fixed pool of savings that would otherwise be invested by the private sector. Many savings are just lying idle in bank accounts, because the private sector lacks the confidence to invest them. By offering investors a risk-free rate of return, the government can put these savings to active use. And by generating employment, this “crowds in” additional savings.

Finally, “Ricardian equivalence” ignores how government spending can pay for itself, not just by increasing national income (and therefore government revenue) but by investing in projects that create value for the economy, such as schools, houses, transport infrastructure, green energy, and so on.

Probably few policymakers today believe these “crowding-out” stories literally. I doubt whether even George Osborne does. But they believe that governments need to behave as though they believe these ideas in order to retain the “confidence” of the markets.

So, the question is: why do the markets believe them? Why do they scream “Default” whenever government borrowing goes up? Why did Osborne feel that unless he got the deficit under firm control, he would be spooked by the markets?

The reason is that, for the past 30 years, all economically literate or market-savvy persons (who do not generally include politicians) have been slaves to “models” of the economy which ruled out severe recessions by assumption. Even social democrats, who wanted to use the tax system to redistribute the wealth created by the private sector, bought in to the dominant view that, on average, markets do not make mistakes. This was the tragedy of Gordon Brown; it is also why Labour under Ed Miliband has been unable to deploy a convincing case against Osbornite economics.

Consequently, it is not surprising that governments and central banks failed to take precautions against a slump happening; more surprising that they did not thoroughly revise their beliefs when it did happen. To some extent, they did. When the world economy crashed in the winter of 2008 all the main governments came in with bank bailouts and stimulus packages. But as soon as the danger of another Great Depression was removed, the old orthodoxies reasserted themselves. In particular, as it was bound to do, the slump left a legacy of rising deficits and taxpayer liabilities. In this kind of climate, fears about the solvency of governments seemed reasonable.

And mainstream economics offered no help at all. What was going on, the economists said, was just a readjustment of economic life from one optimum equilibrium to another. Thus there was no “output gap” that needed to be filled by extra government spending. Rather, what needed to be done was to cut down state spending in order to make the existing output more productive. The Chancellor is no economist: but this presentation played to his ideological preconceptions. In a world-view of this type, there is no distinction between the short run and the long run. We always live in the long run, and if we leave the long run to the markets, all will be for the best. 


A world in which beliefs and facts have come so far apart will be particularly prone to delusionary thinking. The delusion was that policies that made the recession worse would produce recovery. This delusion was abetted by reputable economists. Three years ago, the doctrine of “expansionary fiscal contraction” was all the rage and a huge research effort went into trying to prove its core proposition: that the less the government spends, the faster the economy will grow. The econometricians produced some striking correlations. One claim was that “an increase in government size by 10 percentage points is associated with a 0.5 to 1 per cent lower annual growth”. In April 2010, Alberto Alesina of Harvard University assured European finance ministers that “many even sharp reductions of budget deficits have been accompanied and immediately followed by sustained growth rather than recessions even in the very short run”.

An International Monetary Fund paper in 2012 brought Alesina’s hour of glory to an end. Going through the same data as he had examined, the IMF authors pointed out: “While it is plausible to conjecture that confidence effects have been at play in our sample of consolidations, during downturns they do not seem to have ever been strong enough to make the consolidations expansionary at least in the short run.” Fiscal contraction is contractionary, full stop.

George Osborne has said publicly that he was influenced by Carmen Reinhart and Kenneth Rogoff. These two Harvard economists claimed that their data showed that countries’ growth slows sharply if their debt-to-GDP ratio exceeds 90 per cent. It turned out that their findings were skewed by the vast overweighting of one country in their sample. But a much more important error was their confusion between correlation and causation, also seen in the work of Alesina. High debt levels may cause lack of growth but a lack of growth may cause high debt levels; or both may be due to some other factor(s). How, one asks, can good statisticians make these kinds of mistakes? Only, I think, because their theory or model already tells them that this is the way the causation has to run, so that their only task is to establish a correlation.

Quantitative easing to the rescue?

With the failure of fiscal “consolidation” to revive the economy, the Chancellor increasingly turned to monetary policy. This fitted his ideology. Orthodox monetary policy works by the central bank targeting short-term market interest rates, providing banks with the reserves needed to keep the rates on target and, by varying the rates (or expectations of future rates), influencing the volume of private-sector lending and borrowing. It bypasses fiscal policy, which is why it is attractive to those who dislike state intervention. Since 2008, monetary policy has been ultra-loose or “unorthodox”. Not only has the bank rate been kept at 0.5 per cent for a record length of time, but the Bank of England has injected £375bn of “new money” into the economy, £225bn of it before Osborne became Chancellor. This is known as “quantitative easing” (QE).

How big a part has QE played in producing a recovery? The quick answer is that no one knows for sure. Unlike government spending, which has a direct effect on the economy, monetary policy works indirectly by inducing private households and businesses to change their behaviour – to save more or spend more. QE is supposed to work through two “transmission channels”: the bank lending channel and the portfolio rebalancing channel.

The central bank activates both channels by buying government bonds (gilts), mainly from non-banks. The sellers of the bonds receive cash; they deposit their extra cash with the commercial banks. In the first transmission channel, this is supposed to increase bank lending. The banks have more cash to lend out, causing them to lower their interest rates. As a result, more money is borrowed by businesses and households; the spending of the loans raises total spending, and therefore output, in the economy.

Early experience of QE showed that this was not happening: the banks were hoarding their cash, not lending it out. The architects of QE had underestimated the damage that banks had suffered as a result of the collapse of their assets in the crash, and therefore their desire to rebuild their reserves. What Osborne then did was to start subsidising bank lending. The Funding for Lending scheme, introduced in July 2012, was supposed to stimulate bank loans to businesses. It failed to do this – business lending is still well down from its pre-crash levels.

Desperate to get something in the economy going up, the Chancellor switched to Help to Buy in April and October 2013, which insured banks for a 15 per cent loss on 95 per cent mortgages. This has certainly contributed to the recent surge in house-buying and the rise in house prices.

It should be noticed, however, that both attempts to boost bank lending are fiscal policy by the back door, as the contingent subsidies are liabilities for the taxpayer.

Because of the disappointing results of bank lending, the Bank of England came to rely more on the second transmission channel, portfolio rebalancing, to stimulate the economy. Bond purchases by the Bank swell the cash deposits of the sellers, encouraging them to spend. Simultaneously, they reduce the supply of gilts in the market, which causes the price of gilts to rise and their yields to fall. The “search for yield” then induces investors to switch from gilts to stock-market securities and other assets, making it easier for businesses to raise capital. The increase in the price of these assets also expands the net wealth of the asset-holders, causing them to spend more. These various effects will result in growing GDP. Certainly the rise in stock-market and house prices has contributed to a “feel-good” factor, which is bolstering the current optimism about future prospects.

Set against these benefits are two costs. By encouraging excessive risk-taking, QE may reignite the pre-crash asset bubble, against which the new governor of the Bank of England, Mark Carney, has warned. The second is the increase in inequality. Of this, John Kay wrote in the Financial Times: “In the modern financial economy, the main effect of QE is to boost asset prices . . . the one certain outcome of QE is that those with assets benefit relative to those without . . . these policies may not benefit the non-financial economy much, but they are helpful to the financial services sector and those who work in it.”

The trouble with unorthodox monetary policy was that it is not unorthodox enough. Rather than try to increase private-sector cash balances, the Bank should have lent the money directly to the government to spend on public investment. We can be sure the government would not have hoarded the cash! But this operation would have blurred the line between monetary and fiscal policy, and thus the sacred ideological divide between the private and public sectors.

To put the matter crudely: a recovery based on stuffing the mouths of bankers with gold will be weaker and less durable than a recovery based on an upsurge of mass spending power. 


Wealth and income have been growing more unequal in Britain since the 1980s. George Osborne has not created the inequality; but he has exacerbated it by dragging out the slump and using lopsided means to bring about the recovery. Britain may well emerge from the recession with a problem of structural underconsumption. Investment is driven by consumption, so when consumption falls off, so does investment. A tendency to domestic underconsumption – unless offset by a buoyant demand for exports – will result in what economists such as Larry Summers have started to call “secular stagnation”. The chief symptom of this will be rising structural underemployment: a slackening of demand for labour which does not reverse itself with recovery.

This brings us back to the ideological fundament. It is the Chancellor’s firm belief that the government’s share of total spending should be reduced as much as possible. Spending financed by deficits is twice cursed, not just because government spending is wasteful, but because it enables governments to pass on the cost of waste to future generations. Hence Osborne’s pledge to eliminate the Budget deficit entirely. This is tantamount to saying that the government expects to pay out of taxes for all the schools, hospitals, housing and transport systems that it builds. Because all Conservative governments want to reduce taxes as well, this amounts to a vast programme to privatise virtually all public services.

At this point, the ideology destroys sane economics. A sensible view of public spending would distinguish between capital spending and current spending. It would enable one to say that deficits resulting from excessive current spending are bad because they do not generate any revenue and add to the national debt, but deficits that are incurred on capital spending can raise productivity, improving the country’s long-run potential. A sensible Osborne policy would have been to confine cuts to the current account and offset these fully by expanding public investment in green projects, transport infrastructure and social housing, as well as export-oriented small and medium-sized businesses (SMEs). The Business Secretary, Vince Cable, has been arguing this case inside the government; lip-service is paid to the principle, but public investment is still 35 per cent down from the pre-crash levels.

What George Osborne has done is to bring an ideological fervour to a defective theory of macroeconomic policy: the theory that additional government spending can, under no circumstances, move the economy to a better-equilibrium growth path. What may be rational to believe when the economy is fully employed is palpably wrong when resources stand idle.

Moreover, it is not Osborne and his friends and bankers and Top People who suffer. It is the ordinary people of this country, whose lives and prospects are wrecked or diminished. Four years of George Osborne have been four years too many.

Robert Skidelsky is a cross-bench peer and a leading biographer of J M Keynes. His most recent book is “Five Years of Economic Crisis” (Centre for Global Studies, £5)

This article first appeared in the 12 March 2014 issue of the New Statesman, 4 years of austerity

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When it comes to responding to Islamic State, there is no middle ground

If Britain has a declared interest in curtailing Islamic State and stabilising Syria, it is neither honourable nor viable to let others intervene on our behalf.

Even before the brutal terrorist attacks in Paris, British foreign policy was approaching a crossroads. Now it is time, in the words of Barack Obama, addressing his fellow leaders at the G20 Summit in Turkey on 16 November, “to step up with the resources that this fight demands”, or stand down.

The jihadist threat metastasises, and international order continues to unravel at an alarming rate. A Russian civilian charter plane is blown out of the sky over the Sinai Peninsula in Egypt, killing 224 people, most of them returning from holiday, and the various offshoots of Islamic State bare their teeth in a succession of brutal attacks in France, Lebanon, Tunisia, Turkey and further afield. Our enemies are emboldened and our friends want to know to what extent we stand with them. The UK can no longer afford to postpone decisions that it has evaded since the Commons vote of August 2013, in which the government was defeated over the question of joining US-led air strikes against President Bashar al-Assad’s regime following a chemical weapons attack on Syrian civilians. MPs’ continued introspection is on the verge of becoming both irresponsible and morally questionable. There is no fence left to sit on.

On Sunday night, two days after the Paris attacks, the French – with US support – launched a series of bombing raids against Islamic State targets in Raqqa. With much more to come, the choice facing this country may not be easier but it is certainly clearer. Britain must determine whether it wants to be a viable and genuine partner in the fight against Islamic State, and in the long-term efforts to bring an end to the assorted evils of the Syrian civil war; or whether we are content to sit on the sidelines and cheer on former team-mates without getting our knees dirty. We can join our two most important allies – France and the United States, at the head of a coalition involving a number of Arab and other European states – in confronting a threat that potentially is as grave to us as it is to France, and certainly more dangerous than it is to the US. Alternatively, we can gamble that others will do the work for us, keep our borders tighter than ever, double down on surveillance (because that will certainly be one of the prices to pay) and hope that the Channel and the security services keep us comparatively safe. There is no fantasy middle ground, where we can shirk our share of the burden on the security front while leading the rest of the world in some sort of diplomatic breakthrough in Syria; or win a reprieve from the jihadists for staying out of Syria (yet hit them in Iraq), through our benevolence in opening the door to tens of thousands of refugees, or by distancing ourselves from the ills of Western foreign policy.

That the international community – or what is left of it – has not got its act together on Syria over the past three years has afforded Britain some space to indulge its scruples. Nonetheless, even before the Paris attacks, the matter was coming to the boil again. A vote on the expansion of air operations against Islamic State has been mooted since the start of this year, but was put on the back burner because of the May general election. The government has treated parliament with caution since its much-discussed defeat in the House in summer 2013. The existing policy – of supporting coalition air strikes against Islamic State in Iraq but not Syria – is itself an outgrowth of an awkward compromise between David Cameron and Ed Miliband, an attempt to reverse some of the damage done by the 2013 vote in parliament.

The Conservatives have waited to see where the ground lies in a Jeremy Corbyn-led Labour Party before attempting to take the issue back before the Commons. Labour pleaded for more time when Corbyn was elected, but there is no sign that the Labour leader is willing to shift in his hostility to any form of intervention. More significantly, he has now ruled out Labour holding a free vote on the matter.

If anything, the coalition of Little Englanders, anti-interventionists and anti-Americans in the House of Commons seems to have dug its trenches deeper. This leaves the Prime Minister with few options. One is to use the Royal Prerogative to announce that an ally has been attacked, and that we will stand with her in joining attacks against Islamic State in Syria. The moment for this has probably already passed, though the prerogative might still be invoked if Isis scores a direct hit against the UK. Yet even then, there would be problems with this line. A striking aspect of the killing of 30 Britons in the June attacks in Sousse, Tunisia, is just how little domestic political impact it seems to have made.

Another option for Cameron is to try to make one final effort to win a parliamentary majority, but this is something that Tory whips are not confident of achieving. The most likely scenario is that he will be forced to accept a further loss of the UK’s leverage and its standing among allies. Co-operation will certainly come on the intelligence front but this is nothing new. Meanwhile, the government will be forced to dress up its position in as much grand diplomatic verbiage as possible, to obfuscate the reality of the UK’s diminishing influence.

Already, speaking at the G20 Summit, the Prime Minister emphasised the need to show MPs a “whole plan for the future of Syria, the future of the region, because it is perfectly right to say that a few extra bombs and missiles won’t transform the situation”. In principle, it is hard to argue with this. But no such plan will emerge in the short term. The insistence that Assad must go may be right but it is the equivalent of ordering the bill at a restaurant before you have taken your seat. In practice, it means subcontracting out British national security to allies (such as the US, France and Australia) who are growing tired of our inability to pull our weight, and false friends or enemies (such as Russia and Iran), who have their own interests in Syria which do not necessarily converge with our own.

One feature of the 2013 Syria vote was the government’s failure to do the required groundwork in building a parliamentary consensus. Whips have spent the summer scouting the ground but to no avail. “The Labour Party is a different organisation to that which we faced before the summer,” Philip Hammond, the Foreign Secretary, has said. It is ironic, then, that the Prime Minister has faced strongest criticism from the Labour benches. “Everyone wants to see nations planning for increased stability in the region beyond the military defeat of the extremists,” says John Woodcock, the chairman of the Parliamentary Labour Party defence committee, “but after two years of pussy-footing around, this just smacks of David Cameron playing for time when he should be showing leadership.”

The real story is not the distance between the two front benches but the divisions within both parties. There are as many as 30 Conservative MPs said to be willing to rebel if parliament is asked to vote for joining the coalition against Islamic State in Syria. It seems that the scale of the Paris attacks has not changed their position. A larger split in the Labour ranks also seems likely. Even before Paris, there were rumoured to be roughly 50 MPs ready to defy their leader on this question.


At first, in the wake of last week’s attacks, it seemed as if the Prime Minister might force the issue. To this end, he began the G20 in Turkey with a bilateral meeting with President Putin. His carefully chosen words before and after that discussion, in which he was much more emollient about Moscow’s role, showed the extent to which he was prepared to adapt to the changing situation. Cameron hoped that if he could show progress in building an international coalition on the diplomatic front, that might just give him enough to get over the line in a parliamentary vote.

This new approach has not had the desired effect. At the time of writing, the government believes it is too risky to call another vote in the short term. It calculates another defeat would hugely diminish Britain’s standing in the world. In truth, the government was already swimming upstream. On 29 October, the Conservative-
dominated Commons foreign affairs select committee, chaired by Crispin Blunt, released a report on the extension of British military operations into Syria, in anticipation of government bringing forward a parliamentary vote on the question. The report recommended that Britain should avoid further involvement unless a series of questions could be answered about exit strategy and long-term goals. The bar was set deliberately high, to guard against any further involvement (even the limited option of joining the existing coalition undertaking air strikes against IS in Syria).

The most flimsy of the five objections to further intervention in the report was that it will somehow diminish the UK’s leverage as an impartial arbiter and potential peacemaker. This is based on an absurd overestimation of the UK as some sort of soft-power saviour, valued by all parties for its impartiality in Middle Eastern affairs. Britain cannot hope to have any influence on policy if it is always last to sign up while others put their lives on the line. As so often in the past, what masquerades as tough-minded “realpolitik” is nothing of the sort. It is just another post-facto rationale for inaction.

Although it is sometimes said that Britain has yet to recover from the consequences of the invasion of Iraq, the committee report had a retro, 1990s feel. Many of the objections raised to burden-sharing in Syria were the same as those raised against humanitarian intervention in the Balkans two decades ago, when Blunt was working as special adviser to Michael Rifkind as defence and foreign secretary, and the UK was at the forefront of non-intervention. Likewise, two of the committee’s Labour members, Ann Clwyd and Mike Gapes, were veterans of the other side of that debate, and strong supporters of the Nato intervention in Kosovo in 1999. They expressed their dissent from the report’s conclusions but were voted down by their Conservative and SNP fellow committee members. “Non-intervention also has consequences,” said Gapes when he broke rank. “We should not be washing our hands and saying, ‘It’s too difficult.’”

Polling figures have shown majority public support for air strikes against IS since the spate of gruesome public executions that began last year, but nothing seems to change the calculus of the rump of anti-interventionist MPs.

All this promises an uncertain future for British foreign policy. On 6 November, the Defence Secretary, Michael Fallon, suggested that the UK’s existing position, of joining the coalition in Iraq but stopping at the borders of Syria, is “morally indefensible”. The killing of Mohammed Emwazi, aka “Jihadi John”, by a US predator drone on 12 November demonstrates what he meant. Emwazi was a Briton who was responsible for the beheading of British and American citizens, as well as countless Syrians. While the UK government was closely involved in that operation – and has previously used the justification of “self-defence” to “take out” targets in Syria – such are the restrictions placed upon it that we are forced to ask our allies to conduct potentially lethal operations (which are in our core national interests) on our behalf. The very act of “self-defence” is subcontracted out once again.

How long can this last when Islamic State poses a much greater threat to the UK than it does to the US? There is an issue of responsibility, too, with hundreds of British citizens fighting for and with Islamic State who clearly pose a grave danger to other states.


The very notion that Britain should play an expansive international role is under attack from a pincer movement from both the left and the right. There are two forms of “Little Englanderism” that have made a resurgence in recent years. On the left, this is apparent in the outgrowth of a world-view that sees no role for the military, and holds that the UK is more often than not on the wrong side in matters of international security, whether its opponent is Russia, Iran, the IRA or Islamic State. The second, and arguably just as influential, is the Little Englanderism of the right, which encompasses a rump of Tory backbenchers and Ukip. This is a form of neo-mercantilism, a foreign policy based on trade deals and the free movement of goods that regards multilateralism, international institutions and any foreign military intervention with great suspicion, as a costly distraction from the business of filling our pockets.

The time is ripe for long-term, hard-headed and unsentimental thinking about Britain’s global role. The country is not served well by the impression of British “decline” and “retreat” that has gained ground in recent times; and it is no safer for it, either. Given how quickly the security and foreign policy environment is changing, the publication of the Strategic Defence and Security Review in the coming week, alongside an update of the National Security Strategy, is likely to raise more questions than it answers. The officials responsible for its drafting do not have an easy brief, and news forecasting is a thankless task. Strategic vision and leadership must come from our elected politicians.

For all the talk of British decline, we are still one of the five wealthiest nations in the world. What we do matters, particularly at moments when our friends are under attack. However, until a new broad consensus emerges between the mainstream Labour and Conservative positions on foreign policy, the Little England coalition will continue to have the casting vote.

Syria continues to bleed profusely and the blood seeps deeper into different countries. There will be no political solution to the civil war there for the foreseeable future; to pretend that there is a hidden diplomatic solution is to wish to turn the clock back to 2011, when that might have been possible. Nor is the security situation any easier to deal with. A few hours before the attacks in Paris began, President Obama gave an interview in which he argued that he had successfully “contained” Islamic State. For the wider Middle East and Europe, that is simply not the case. Now, France will escalate its campaign, and the US will do more. Russia already has troops on the ground and will most likely send reinforcements.

The war in Syria is becoming more complicated and even more dangerous. The best that can be hoped for is that the Syrian ulcer can be cauterised. This will be achieved through the blunting of Islamic State, simultaneous pressure on Assad, and the creation of more safe places for Syrians. All roads are littered with difficulties and dangers. Yet, in the face of this ugly reality, is Britain to signal its intention to do less as every other major actor – friend and foe alike – does more? If we have a declared national interest in curtailing Islamic State and stabilising Syria – both because of the growing terrorist threat and because of the huge flow of refugees – then it is neither honourable nor viable to let others take care of it on our behalf.

John Bew is an NS contributing writer. His new book, “Realpolitik: a History”, is newly published by Oxford University Press

This article first appeared in the 19 November 2015 issue of the New Statesman, The age of terror