Show Hide image

Andrew Marr: Why the pundits got it wrong - and what the parties should do next

As the media try to make sense of the 2015 general election, Andrew Marr explains why predictions were so far off the mark.

As we try to sift the meanings of the 2015 general election, it’s worth beginning with a fundamental but far too little-discussed problem for political journalism: how the hell do we know what we think we know? What value – if any – do commentators, set apart from the professional politicians, actually bring? It’s not surprising that most of the time we commentators don’t like to talk about this. This spring, we really must.

I pick up my information from four sources, I realise, all of them suspect. The first is the politicians; during this campaign I spoke regularly to the parties, and to old friends across the political spectrum. The party HQs proved to be either deluded, or lying: I was told again and again by Labour that its ground operation was superb and its numbers, particularly in the north-west of England and the Midlands (where the party was slaughtered) were very strong indeed. The Liberal Democrats assured me that Tory talk of destroying them in the English south-west was malicious and ridiculous. (Plainly, it wasn’t.) The Tories said they were doing fine, you know, fine-ish, but never sounded hugely confident.

So much for going to the top. More useful were politicians from all sides I’ve known for years. A series of experienced Labour people sounded pretty wobbly – I should have spent more time thinking about that and less about the messages from the centre. Some Conservative MPs, notably George Osborne, seemed much more confident than Cameron HQ.

The second source, and one that dominated everybody’s day-to-day thinking, was the polling. The pollsters didn’t get everything wrong: they picked up the huge Scottish story. Then again, anybody who stepped off the train at Edinburgh Waverley Station and bought a latte would have picked that up. But they were massively out on the main story. My deep frustration is that this tilted the whole conversation about politics – the reporting, and therefore the pressure the reporting placed on the politicians. To be specific, if we had known how close the Liberal Democrats were coming to wipeout, there might have been speculation about what that would mean. Everybody ignored this. Had we known how badly Labour was doing, there would have been much more pressure on Ed Miliband over his main economic message. There wasn’t nearly enough.

My third main source was the rest of the commentariat, this time including the self-appointed commentariat of Twitter. That’s a big range of voices. But during an election campaign, people retreat into their ideological bunkers. There are some who ask pene­trating questions, keep their heads tilted sceptically, and are worth following, but by and large journalists listening to other journalists only produces an echo chamber of lazy, received opinion, big on the volume, an ear-splitting background noise.

This leads me to the final source of information, always ridiculed and yet the one that proved most accurate and that I wish I had spent more time attending to – anecdote and random conversation. That is plainly dangerous: we are all prisoners of our own geographical and class location, however much we think we are in the swim. One of the advantages of having a televised face and jug ears, however, is that people come up to you the whole time and tell you, unprompted and unstoppably, what they think. As I was doing my daily walk to the shops, or sidling off to my local for a pint of IPA, I was buttonholed again and again.

What people wanted to say, in my part of London, could be broken down into two big themes. First, they hated the idea of a minority Labour government backed by the SNP. Almost immediately that this became a leading Tory theme, I was picking it up on the street. After the first two weeks of a Tory campaign focused on the economy generally and the uselessness of Ed Miliband, and which seemed to me to have been from their point of view wasted time, plainly the Conservatives had found something that was cutting through.

The second theme was that Labour apparently “hated” the self-employed, people running or working in small businesses, and anyone who’d had any kind of success. I’m going to come back to this, but it struck me at the time. A painter and decorator, for instance, who employs half a dozen others, walked across the street to say: “I can’t vote Labour. I work bloody hard. I’m the kind of person they despise . . .” As with the anti-SNP reaction, you ignore a single comment but when you hear the same kind of thing dozens of times, you know that something is going on.

***

Now this isn’t the complete sum total of what was going on in my head during the campaign. I’ve been covering these things since 1983, and echoes of John Major in 1992 reverberated. But note that, compared to his open and confrontational street oratory back then, in among the jeering, the leaders this time were sanitised and surrounded by pre-selected audiences. Jim Murphy, the Scottish Labour leader, put himself through it in Scotland; but apart from that, it seems to me that all the money spent by the broadcasters and newspapers on sending their correspondents to join Cameron, Miliband and Clegg on their bus tours was wasted. No election is just like any other. Having been around for a long time is no guarantee of wisdom.

Other sources will be more respected next time. The betting market wasn’t great – money was pouring on to Ed Miliband right at the last minute, by which time he’d already lost – but the gilt markets seemed to know what was going on. Number crunchers using historical voting data did pretty well. And intriguingly, those in the parties who had scanned postal voting returns were also in on the secret.

Finally, I’ve interviewed many dozens of politicians many times. I ought, therefore, to know where their weaknesses are – though that doesn’t necessarily translate into knowing what the public thinks. But if there is a logical problem obvious to me, presumably it is obvious to millions of ­other people. The ever more glazed and convoluted attempts by the two Eds to avoid saying that they had overspent while in office is a good example.

There was a perfectly rational way of dealing with this. They could have said: “Look, the overspending was relatively minor in historic terms and was supported by almost everybody at the time. And be very careful of describing the building of new hospitals, schools and nurseries as ‘profligate’ or ‘waste’: our alleged overspending has given Britain places where children are currently learning and their grandparents are having heart operations. It’s not like blowing too much money on your credit card in B&Q.

“At the time, none of us knew – not you, not the government, not David Cameron or George Osborne – that an obscure housing crisis in Middle America was going to bring down the entire banking system.”

They could have said that. They didn’t.

Why not? Because, had they engaged in the conversation seriously, they would have had to go on to say something like: “However, given what we know now, do we wish we had spent a little less during the good times? Of course we do.” And, true or not, they thought that the Conservative media would have translated this into: “Ed admits, ‘Yes, the crash was our fault.’”

That seems to me to have been a huge tactical mistake on the Labour side. The party should have engaged in the argument, and made its case, not unreasonable, long before the proper election campaign started. As I have written here before, by allowing the Conservatives to set that narrative they handed David Cameron a huge weapon, which he used during April and May almost every day.

There were big mistakes on the Tory side, too, I thought. I was flabbergasted when Cameron and Osborne suddenly found a minimum of £8bn, and perhaps a lot more, for the NHS right at the last minute. It seemed to me to blow a hole in their “uncosted spending commitments” attack on Labour. In the end, it didn’t seem to matter, because voters presumably thought that ­Labour would always spend and borrow more than the Tories, whatever anybody said. Still, it was a heck of a risk.

***

But the biggest issue that emerged during interviews was, as I found on the street, the SNP surge. I have been studying and writing about the Scottish National Party since I was in my twenties. I wish I had been back in Scotland much more, and earlier, but I’ve been up there quite a lot recently, working and visiting family. So I know that the SNP is not the Maoist threat Middle England cowers from. Among its new MPs are former Conservatives, business people, all types. It’s true that its new 110,000 membership contains many on the hard left who have made a lot of noise, but the party is a complex phenomenon.

Still, the “watch my lips, no deals” rebuttals by Ed Miliband were always going to be difficult. He might have ruled out a coalition and a formal confidence-and-supply arrangement, but the numbers dictated that a minority Labour government – the best he could hope for – would have to rely on SNP acquiescence at best week by week.

Now, I have no hard evidence for what follows, but I don’t believe that English ­voters’ hostility to an SNP-influenced outcome was anti-Scottish. I think it was the combination of the thought of a relatively weak government, which would have to negotiate its way through its programme, with the anti-Trident and anti-austerity messages of the SNP, that spooked much of Middle England.

Don’t forget that all the voters who do not want Trident, and were against austerity, weren’t up for grabs anyway: they were ­already committed, presumably, to Labour or the Green Party. So a Scottish National Party programme, crafted to appeal to Glasgow Govan and Dundee, didn’t go down so well with soft Tory voters and Liberal Democrats in Cirencester or the Peak District. Quelle surprise!

That, for me, was the story of this election campaign. Looking ahead, what lessons can we draw from it?

Living in London, I am very cautious about trying to predict what is going to happen in Scotland next. But the following things seem almost self-evident. First, to have any chance of revival, Scottish Labour has to separate itself from the party south of the border. It has to begin again, unionist but with its own head office; back to the party’s origins. This may not work, either. Second, in politics, winning brings new problems and winning big brings bigger new problems. Nicola Sturgeon now not only has to negotiate with somebody she never thought she’d have to deal with, and who has the authority of a big election win, she has to manage the enormous expectations of what looked like, in effect, a Scottish revolution. I couldn’t fit into her shoes in a million years; but I’m glad I don’t have to try.

As to the shattered English left, I go back first to all those conversations about Labour not being for “people like me”. Labour politics works when it is, in effect, an alliance between the bulk of people working in private companies, big and small, and those on the margins. Now, if Labour chooses to forget about people on benefits, those on poverty wages, and the huge inequities caused by a super-rich global class, then it ceases to have any purpose. But it simply can’t get itself into a position again where shopkeepers, tradesmen and all those who want to better themselves think Labour “hates” them.

I don’t suppose this was something that Ed Miliband or those around him ever set out to achieve. It was more about tone, and where they came from, and what their own instincts were. Britain is brimming with relatively affluent (or at least comfortable) non-socialists who have a strong sense of community and social altruism. They support homelessness projects run by churches, they back local campaigns, they spend spare income not on bigger cars but on Oxfam appeals. They are good people. They just happen to be outside the immediate reach of the state. Labour can sometimes give the impression that only those working in the public sector or those on benefits are virtuous and admirable. This is politically lethal.

***

Is that more important, or less important, than confronting the “Blue Labour” questions of immigration, low pay and embattled trade unionism? I don’t know – but reaching out to the majority isn’t a luxury.

So, Labour has a cultural problem to resolve. It’s about how the party speaks, the way it pitches its appeal. It is vastly more important than who the next leader is. Over the next few years, we will see, I suspect, little real sign of a Labour advance in Scotland – the defeat is so profound that it will take many years to recover – while in England boundary changes further entrench the Conservatives. Unless Labour has the courage and imagination to reform itself completely, it has no chance of recovery.

Democracy is a pendulum. Not even the biggest and most unexpected victories last; in fact, they contain the seeds of the next defeat. Yet this assumes and requires that the defeated parties learn hard lessons. The Tories’ biggest problem ahead isn’t the EU referendum. It isn’t even the relationship between London and Scotland – federal Britain is taking shape before our eyes. No, it is their relationship with big money, the global financial system that remains unstable and often incompetent. David Cameron is a more sophisticated and flexible Tory leader than many understand. But I don’t see him trying to fix that problem, and that leaves Conservatism vulnerable.

Ought Labour and the Liberal Democrats to forget their differences and try to merge? Probably not: they have different philosophies and those differences matter. But it would be a good, useful and salutary thing for both of them to contemplate the possibility. A big election defeat ought to shatter old ways of thinking. It’s important not to waste a good defeat. I have spent the past few days doing two things – sleeping and worrying about how I do my job.

Defeated politicians, as well as humbled journalists, could do worse.

Andrew Marr’s most recent book is his novel, “Head of State” (Fourth Estate)

Andrew Marr is a broadcaster and journalist. Formerly the BBC’s Political Editor, he presents the Andrew Marr Show on BBC1 on Sundays and Start the Week on Monday mornings on Radio 4.

This article first appeared in the 14 May 2015 issue of the New Statesman, The Tory triumph

MILES COLE
Show Hide image

The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt