A Long Week

Harold Wilson, allegedly the Queen's favourite prime minister, said "A week is a long time in politics".

The present prime minister must be finding the weeks constantly elongated as events turn against her and more of her ministers begin publicly to cavil at the inheritance of Osbornian austerity that almost cost the Tories the election. The precarious position of the party in parliament makes it almost impossible for the leader to dismiss querulous ministers; and the chancellor [whom she expected to be able to dismiss, following an electoral triumph] is now in a position strongly to influence the Brexit discussion.

A delegation from the City of London is off to Berlin this week, to make an assessment of the appetite of the Germans for a form of Brexit that would leave the UK firmly within the European Economic Area. The shock of the Brexit decision has been followed by months of assiduous work in the City, and there is no doubt that the loss of [at least] tens of thousands of jobs from the financial services would be a calamitous blow to the whole British economy. The financial bubble that has been inflated ever since 1986 in compensation for the destruction of the materially-productive bulk of the economy has provided a support mechanism for the economy, and its removal would have utterly catastrophic consequences. The chancellor is now fully aware of this; but it is doubtful if the prime minister could comprehend this: it is also questionable whether all three Brexit Ministers - Davis, Johnson and Fox - fully understands the importance of the point. Certainly the insouciance displayed by Davis on the matter is alarming.

But the clock has been ticking, and those who are capable of recognising the signs of impending crisis have begun to read them the same way. A minority of Labour MPs also showed last week that they have a pretty good idea of the problem, when they voted against the party line to stress their concern that Corbyn's left-wing contempt for capitalism could impose on the Labour party an interpretation of Brexit that would plunge the country into chaos and a whole era of impoverishment. A tiny number of extreme lefties would be happy to impose the hair shirt austerity of the Stalin era in Russia on the British nation; but they would not have many followers, and the Momentum movement has not yet gained sufficient power to unseat all the rational Labour MPs if there were to be an early general election.

All the rational Conservatives have come to realise that their precarious alliance with the Paisley faction must last for at least the two years while the Brexit negotiations continue. If the government can gets its act together in the next month, recognising that the maintenance of momentum in the economy depends on being in the European Economic Area [on the best terms that can be negotiated: though they will not be ideal], there is a chance that they will gain sufficient goodwill in the mass of the population to have a chance of winning an election. That is conditional on the change in policy that I mentioned yesterday: there needs to be more money for public sector workers' pay, as Gove and Johnson are not pointing out. And there must be a resolution of the student fees issue: the reckless promise of Labour in the last election, simply to abolish those fees [and probably write off the debts owed by past borrowers] puts the Tories in an impossible position as long as they retain the Osborn line; so they are going to have to admit that so many holes are being poked in austerity that it might just be wise to admit that the policy is not acceptable.

Wars are fought by selling government bonds, to buyers who accept the extreme urgency of the situation. The present situation is no less alarming than a war. The government must be willing to replace austerity by a combination of flexibility on key areas of public spending and a massive investment in infrastructure, coupled with the development of a facility for the state [directly and through the banking sector] to invest heavily in all the firms that have credible business plans to advance technology and innovation. Mrs May's early decision to let Japanese speculators buy ARM was a very bad indication of her incomprehension: she needs to be educated; otherwise, like Anthony Eden, she needs to be taken away on leave. And there are not many weeks left for one or the other of these steps to be taken. The Tory party has saved itself by ruthlessness in the past: the era of "you've never had it so good" followed on very soon after the Suez catastrophe. They need to find the same strength again: with or without Mrs May.