Mike Newton was Conservative parliamentary candidate for Wolverhampton West, and worked for the Bank of England during his career in the financial markets.
I have often thought that if we do get back into office again, the ‘to do’ list will be so overwhelming that the government could be bogged down very quickly.
We must have a clear and robust plan ready for when that day comes. Indeed, without one, the electorate may not trust us enough for that day to arrive.
Trying to unwind five years of socialism, much of it now rooted institutionally, introducing our own legislative programme and dealing with the inbox of unexpected crises that a Prime Minister invariably faces, is a huge task. It may be insufficient with an orthodox approach.
Most new governments start off with a plan.
It might be along the lines of a classic ‘First Hundred Days’ or perhaps a specific mandate to deal with a particular problem, such as Brexit. It could even be what Mr Burnham is doing now, soft-focusing on easy wins to clear the way for a hard-left agenda. But in general, there is some sort of scheme of manoeuvre.
Much of this programme tends to fail, or at best be delivered sub-optimally. The distraction of unexpected crises sucks resources and psychological strength. Agendas, so clear in opposition, dilute and diverge in the face of power. There is internal and institutional dissent.
Before one knows it, the government is two years in, has lost key figures and is behind in the polls and floundering.
The reasons for failure are often rooted in the inability to see the bigger picture, and act decisively and coherently earlier. Too often this is due to a failure to see a programme of government as connected working parts, co-dependent on each other.
A lack of toughness also plays a part, although this is unlikely to be a problem under Mrs Badenoch. Consider the following two examples.
I respect Edward Heath, despite me being firmly on the Right and pro-Brexit. But his 1972 U-turn on the economy with the Counter-Inflation Act, and the later re-establishment of the Price Commission and introduction of the Pay Board, were catastrophic mistakes, and the result of not going far enough earlier to deal with the underlying problems.
One could even go back further to a similar mistake: ‘Rab’ Butler being forced to drop a cutting-edge plan to allow the full convertibility of sterling in 1952 after severe Cabinet and Civil Service opposition. (This was eventually introduced by Mrs Thatcher in 1979.)
But to what analogue do we turn now?
I think the answer lies in how you frame two questions: how deep is the damage to Britain and how bold do you want to be?
My answer to the first is that there are serious structural problems, particularly economic, that need to be reversed, or the country will simply run out of money. The private sector needs to be allowed to grow faster, and the size of the state needs to shrink.
As a former Bank of England official, who has also worked closely with the IMF, I am particularly concerned about the fiscal mess we may inherit, and over-regulation that prevents growth.
Economic problems have been building up for years. The long period of low global interest rates is over, and Asia is no longer exporting cheap consumer goods to the rest of the world. The peace dividend has reversed. The lifestyle of the last 25 years is over.
The second is more personal. I want the next Conservative government to be a bridge to the future, not a promise that failed.
The electorate, should they give us their trust once more (which is far from a given), will not forgive us again. The next government’s performance will be existential for all of us. So, the balance must lie towards boldness, driven by competence and planning, not policymaking on the hoof.
The experience of ‘Shock Therapy’ in Poland in the late 80s and early 90s is an attractive one. A new government inherits a semi-bankrupt economy, with a state sector that is way too big and price signals are obscured by government interference.
The Solidarity-led government effectively swept away the socialist state in ‘one go’ and re-allocated capital to the more productive private sector. This avoided the fatal mistake of indecision but took considerable political courage. A sharp, yet short-term, drop in output was traded for a better longer-term outcome.
Much has been written on the Polish experience, particularly by its architect Jeffrey Sachs. Not all of it is appropriate or doable. But the prime read-across for the UK is clear: cut budget deficits rapidly and introduce liberalization wherever possible.
And do this as quickly as feasible to avoid what economists call ‘status quo bias’: of which the UK has had quite enough in recent years.
As bond markets continue to trade poorly, a plan becomes more important. The legendary American investor Stan Druckenmiller wrote on August 25th the following. (It is in a US context, but the message is plain enough for the UK.)
“Neither party will run on entitlement reform. Both have spent the past decade expanding commitments while ignoring arithmetic. Democracies don’t repair their finances because a budget office publishes a table. They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.”
We are well into this cycle now in the UK, and it is possible that the tipping point will be reached sooner rather than later. Gilt yields continue to rise with serious consequences. Government solvency may be tested imminently. There is almost certainly going to be a huge mess that someone must clear up.
The Shadow Secretary of State for Business and Trade, Andrew Griffith MP, often says that he is an optimist, and I share that characteristic. (I think there is no point in being in politics if one isn’t.)
I am optimistic that if we can continue to rebuild the public’s trust and persuade them to give us a mandate, we can undertake the surgery needed to build a new Britain based on Conservative values. Carefully planned and applied shock therapy may be an essential tool in doing this.
Indeed, to paraphrase what someone dear to our hearts once said, ‘there may be no alternative.’
Mike Newton was Conservative parliamentary candidate for Wolverhampton West, and worked for the Bank of England during his career in the financial markets.
I have often thought that if we do get back into office again, the ‘to do’ list will be so overwhelming that the government could be bogged down very quickly.
We must have a clear and robust plan ready for when that day comes. Indeed, without one, the electorate may not trust us enough for that day to arrive.
Trying to unwind five years of socialism, much of it now rooted institutionally, introducing our own legislative programme and dealing with the inbox of unexpected crises that a Prime Minister invariably faces, is a huge task. It may be insufficient with an orthodox approach.
Most new governments start off with a plan.
It might be along the lines of a classic ‘First Hundred Days’ or perhaps a specific mandate to deal with a particular problem, such as Brexit. It could even be what Mr Burnham is doing now, soft-focusing on easy wins to clear the way for a hard-left agenda. But in general, there is some sort of scheme of manoeuvre.
Much of this programme tends to fail, or at best be delivered sub-optimally. The distraction of unexpected crises sucks resources and psychological strength. Agendas, so clear in opposition, dilute and diverge in the face of power. There is internal and institutional dissent.
Before one knows it, the government is two years in, has lost key figures and is behind in the polls and floundering.
The reasons for failure are often rooted in the inability to see the bigger picture, and act decisively and coherently earlier. Too often this is due to a failure to see a programme of government as connected working parts, co-dependent on each other.
A lack of toughness also plays a part, although this is unlikely to be a problem under Mrs Badenoch. Consider the following two examples.
I respect Edward Heath, despite me being firmly on the Right and pro-Brexit. But his 1972 U-turn on the economy with the Counter-Inflation Act, and the later re-establishment of the Price Commission and introduction of the Pay Board, were catastrophic mistakes, and the result of not going far enough earlier to deal with the underlying problems.
One could even go back further to a similar mistake: ‘Rab’ Butler being forced to drop a cutting-edge plan to allow the full convertibility of sterling in 1952 after severe Cabinet and Civil Service opposition. (This was eventually introduced by Mrs Thatcher in 1979.)
But to what analogue do we turn now?
I think the answer lies in how you frame two questions: how deep is the damage to Britain and how bold do you want to be?
My answer to the first is that there are serious structural problems, particularly economic, that need to be reversed, or the country will simply run out of money. The private sector needs to be allowed to grow faster, and the size of the state needs to shrink.
As a former Bank of England official, who has also worked closely with the IMF, I am particularly concerned about the fiscal mess we may inherit, and over-regulation that prevents growth.
Economic problems have been building up for years. The long period of low global interest rates is over, and Asia is no longer exporting cheap consumer goods to the rest of the world. The peace dividend has reversed. The lifestyle of the last 25 years is over.
The second is more personal. I want the next Conservative government to be a bridge to the future, not a promise that failed.
The electorate, should they give us their trust once more (which is far from a given), will not forgive us again. The next government’s performance will be existential for all of us. So, the balance must lie towards boldness, driven by competence and planning, not policymaking on the hoof.
The experience of ‘Shock Therapy’ in Poland in the late 80s and early 90s is an attractive one. A new government inherits a semi-bankrupt economy, with a state sector that is way too big and price signals are obscured by government interference.
The Solidarity-led government effectively swept away the socialist state in ‘one go’ and re-allocated capital to the more productive private sector. This avoided the fatal mistake of indecision but took considerable political courage. A sharp, yet short-term, drop in output was traded for a better longer-term outcome.
Much has been written on the Polish experience, particularly by its architect Jeffrey Sachs. Not all of it is appropriate or doable. But the prime read-across for the UK is clear: cut budget deficits rapidly and introduce liberalization wherever possible.
And do this as quickly as feasible to avoid what economists call ‘status quo bias’: of which the UK has had quite enough in recent years.
As bond markets continue to trade poorly, a plan becomes more important. The legendary American investor Stan Druckenmiller wrote on August 25th the following. (It is in a US context, but the message is plain enough for the UK.)
“Neither party will run on entitlement reform. Both have spent the past decade expanding commitments while ignoring arithmetic. Democracies don’t repair their finances because a budget office publishes a table. They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.”
We are well into this cycle now in the UK, and it is possible that the tipping point will be reached sooner rather than later. Gilt yields continue to rise with serious consequences. Government solvency may be tested imminently. There is almost certainly going to be a huge mess that someone must clear up.
The Shadow Secretary of State for Business and Trade, Andrew Griffith MP, often says that he is an optimist, and I share that characteristic. (I think there is no point in being in politics if one isn’t.)
I am optimistic that if we can continue to rebuild the public’s trust and persuade them to give us a mandate, we can undertake the surgery needed to build a new Britain based on Conservative values. Carefully planned and applied shock therapy may be an essential tool in doing this.
Indeed, to paraphrase what someone dear to our hearts once said, ‘there may be no alternative.’