As Kwarteng is sacked and the Tory Party spirals into chaos, Chris Bambery takes a long view of the current crisis

Britain is no stranger to the financial markets creating chaos with a run on the pound. This is in fact the usual means employed to force a reverse in the policies of a British government. Yet until now the governments in question have almost always been Labour ones.

The exception was Black Wednesday in 1992 when the markets forced the John Major government to quit the European Exchange Rate Mechanism. The result was the Tories lost their reputation for financial and economic management, vicious faction fighting ensued and they were routed by Tony Blair in 1997.

Now the methods used to blow Labour governments off course are being used against a Tory government which has barely come in the door. The markets forced a falling pound, the Bank of England threw cash at a  financial collapse and then hiked interest rates.

Clearly the government of Liz Truss has lost the trust of the ruling class, the very people the Conservative Party exists to represent. Her and Chancellor Kwasi Kwarteng’s mini-budget with its tax cuts for the wealthy got the thumbs down from every major economist, including the most Thatcherite.

Some reverses in that policy have so far not been sufficient to end market pressure. The markets and the IMF are demanding a fresh austerity programme as the cure for Britain’s ills (sound familiar?).

The revelation that hours after introducing his mini-budget Kwarteng briefed hedge fund managers at a champagne reception, indicates that he was linked to the most short-termist elements of the ruling class. But then Kwarteng was a hedge fund manager.

So why have matters reached this point?

The Conservative Party, judged on its periods in office, is the most successful political party in the world. It is the natural party of government in the United Kingdom, with Labour only intermittently in office when the Tories have been thrown into disarray and have had to regroup.

Between 1783 and 1830 the Tories were in office following a period of Whig dominance. They were the government of counter-revolution, at home and abroad, as Britain led and financed a series of coalitions aiming to destroy the French Revolution, Jacobinism and its bastard child, Napoleon.

They were out of office until 1866, with the free trade Liberals governing when Britain was the dominant industrial power and hegemon of the world. Under Benjamin Disraeli the Tories rebuilt themselves as a mass membership party, in response to a widening franchise, stressing crown, constitution and Empire.

Support for imperialism was important to winning a middle class base, and support from a section of the working class. Opposition to Irish Home Rule was important too in undermining Liberal support. Many industrialists, concerned with competition from the USA and Germany, also shifted over to the Tories as they began to question free trade and looked to protected, imperial markets. They also looked electorally to the Tories in countering a growing trade union movement, linked electorally to the Liberals.

Disraeli founded what became the central pillars of the party organisation: the National Union, in 1867, and the Central Office, established in 1870.

He himself was in office from 1874-1880, a period of marked revival in Tory fortunes. The party returned to government in 1886-1892 and then from 1895 to 1906, in alliance with Liberal Unionists who broke from the Liberal Party over Irish Home Rule.

Between 1922 and 1940 the Conservative Party dominated British party politics, only once losing the position of the largest party in the House of Commons. The dominant faction was led by Stanley Baldwin and Neville Chamberlain who stood for avoiding foreign wars and imperial adventures, balancing the books while trying to restore British industry’s failing competiveness by attacking the working class.

Chamberlain eventually came unstuck over his policy of appeasing Hitler by feeding him territory in Central Europe when the Fuhrer welched on the 1938 Munich Agreement (until then appeasement had been the policy of a majority of the ruling class). In the Spring of 1940 Churchill, who had led a small minority of Tory MPs who grasped that Hitler threatened the British Empire (they had no particular problem with fascism beyond that), formed a coalition government with Labour.

The Conservatives returned to office in 1951 and held it until 1964. They accepted the accepted the post-war ‘consensus’: the Welfare State, the public ownership of certain industries, government intervention in economic affairs, and partnership in industry between trade unions and employers.

In the 1950s the Church of England was still the Tory Party at prayer, the Young Conservatives was a mass membership organisation middle class youngsters joined to find a suitable spouse and the Conservative Party was run by industrialists, bankers and aristocrats. These are days long gone.

In 1965 Edward Heath replaced Sir Alex Douglas-Hume as Tory leader. Coming from a middle class background this represented a break from his four predecessors, all aristocrats. When Heath won the 1970 general election, unexpectedly, he began an offensive against the working class attempting to restructure British industry, to curb trade union power and to boost profits by holding down wages. It was an attempt which ended with defeats by the miners and dockers. One member of Heath’s cabinet, Margaret Thatcher, vowed revenge.

The Thatcher years

The election of Thatcher in 1979 saw a decisive change in strategy and marked the start of the fourth era of Tory electoral dominance. Thatcher was a pioneer of neo-liberalism, launching privatisation above all, and taking on the working class in well-prepared set piece confrontations culminating in the 1984-85 mine’s strike, a decisive defeat for the working class.

Thatcher’s original aim was to rebuild a sharp, lean British industrial sector. That proved beyond her. The success of “Big Bang,” the opening up of the City of London and the finance sector to the free market meant she increasingly fell back on promoting those interests as the key to British capital’s success.

The party also changed. The old patrician MPs were leaving Westminster and their replacements were middle class with little connection to big business, though staunch champions of neo-liberalism.

Days of decline

The Tories staggered on in office under John Major until 1997 but by then the party was badly split over Britain’s membership of the European Union. Thatcher had moved in that direction despite the fact she was instrumental in shifting the EU via the Maastricht criteria and monetary union in a profoundly neo-liberal direction. Bitterly divided, the Tories lost by a landslide to Tony Blair and were out of office until 2010.

Despite her own beliefs Thatcherism led to a service-focused economy in which people increasingly worked alongside colleagues from diverse backgrounds. This helped to erode old barriers of racism and sexism. The privatisation of leisure and decline of traditional institutions meant it became more difficult to reproduce the old Conservative values.

The growing number of people owning their own houses was seen as a triumph for Thatcher, because the Tories believed home ownership encouraged people to move rightwards as they grew older. Thus elderly pensioners who own property and landlords who benefit from higher asset prices are a core constituency of today’s Conservative Party. They have no interest in increased housebuilding, especially social housing, or in mortgages subsidies. The Conservatives have a great deal of interest in keeping property prices high to benefit that support.

This policy has created massive problems for them. Following the 2008 financial crash younger people have become increasingly priced out of the housing market. Such younger voters are concentrated in the big cities where the pressures of the private rental sector and low-paid employment are acute.

In contrast older voters are on average more suburban and more likely to own property. According to the U.K. Office for National Statistics, nearly three-quarters of British baby boomers own their own homes. The comparative figure for millennials—after more than a decade of stagnant wages and soaring house prices—is less than 40 percent.

In 2006 the Tories controlled 15 London boroughs, while in 2006 Boris Johnson was elected for the first of his two terms as the Tory mayor of the capital. This year they control just six boroughs, losing control of former strongholds Wandsworth and Westminster. The decades long division over Brexit and the continued fallout from the UK leaving the EU means the Conservative Party is obsessed with national sovereignty and the UK’s supposed independence.

Driving this is not just nationalism but a commitment to centralised state power. Since Thatcher we have seen more authoritarianism of executive rule around law and order and immigration and the distrust of any institution independent of that executive rule, which reached its height with Johnson’s attempted promulgation of parliament over Brexit. In other words the Conservatives have built-in authoritarian habits.

The great disconnection

Since 2010 we have lived through another period of Tory dominance. It hasn’t quite felt that way however  because of the constant divisions within the party, the hectic changes of leader and a growing and obvious disconnect between the Conservatives and the ruling class.

Under Cameron and then Johnson the party seemed too to have returned to the days when Tory grandees ran the show.  Both were old Etonians and Oxford graduates but neither was actually inner core ruling class. Neither had a track record of leadership in finance or industry or sat on the board of a major company.

The Conservative Party is now in the hands of an enraged middle class which does not like the globalised world and wants to get off it. Its membership is over sixty-five in the main and concentrated in the South East. The majority voted for Brexit. They have selected and elected MPs who reflect their outlook.

In other words there is a massive disconnect between them and the ruling class, illustrated by the fact they backed Brexit despite the pleas of the City of London and top CEOs.

The people who manage British capitalism are part of a globalised ruling class. They like London and Edinburgh, but would not set feet in Nottingham. At weekends they play at being country gentlemen and ladies at their homes in the Cotswolds and East Anglia, but this is a pose. They would be perfectly happy to be shifted to run things in New York or Hong Kong. They might cheer on Britain or England at sport but they don’t want to go too far down the patriotic road. Their outlook is 100 percent free market but socially liberal although that doesn’t extend to Muslims and migrants.

The bulk of Conservative members despise such views and are intensely patriotic – or to be precise, English nationalist. A majority put Brexit above maintaining the Union with Scotland. In 2018, a poll by YouGov found that 63 percent of Conservative Party members would be happy for Scotland to leave the U.K. They clearly don’t give a toss for upholding the Good Friday Agreement in Ireland if it gets in the way of Brexit – ignoring the wishes of Joe Biden and Brussels. They put up with David Cameron back in the day because he promised victory but failed to get a majority in 2010 and ended up in coalition with the Liberals, who they hated.

They thought Theresa May might be alright but turned on her for not delivering the Brexit they desired. They loved Boris Johnson and pine for him. They were unsure about Liz Truss. As property owners, with many being landlords, maintaining the property boom and the high price of houses is a priority. The turmoil following Truss and Kwateng’s mini-budget and the hike in interest rates now seems to threaten a collapse in the property market. Bad news for Truss.

In the latest leadership election 81,326 voted for Truss and 60,399 for Sunak. There were 30,058 abstentions, 17.4 percent of votes cast, a very high figure in such a contest. In total 171,783 members voted. This suggests a modest increase in membership since the 2019 contest when 139,318 votes were cast and abstentions were 12.6 percent. But it is way down on the 2.8m membership of the early 1950s (Labour then had one million individual members, not counting affiliated trade unionists).

The Conservative Party membership is not large and not sufficiently active. It is not in a state of collapse but desperately needs new blood. That does not seem to be in supply. Returning to this new government on reaching Downing Street Truss shunted off most of Johnson’s ministers so the current British cabinet is very much the reserve team. Truss herself is clearly less able than her predecessors, which when you think of Cameron, May and Johnson is quite incredible.

Things can only get worse

As well as systemic economic difficulties, Truss faces a series of other problems inherited from her predecessors. One is the very future of the UK.

The emergence of Sinn Féin as the biggest party in Northern Ireland, at the same time as consistent polls show it achieving the same in the Irish Republic, points to a referendum on Irish unity. The mourning for Queen Elizabeth and her funeral was the best pitch for maintaining the UK there might possibly be. It had a very strong Scottish angle because she died at Balmoral. But opinion polls in the wake showed an increase for independence in Scotland and support for independence is rising in Wales, comparable to where it was in Scotland at the start of the 2014 referendum campaign.

The British nationalism displayed by the Conservatives is now increasingly English nationalism, which does not play well in Ireland, Scotland and Wales. Up until the 2019 election capital supported the Tories and donations flowed into their coffers. But there is strong evidence they now rather prefer boring Sir Keir Starmer who is a safe pair of hands and has neutered Corbynism.

The fundamental issue however for the Tory party, is the dire economic outlook. Brian Reading, a former economics adviser to Edward Heath and first economics editor of The Economist points out:

“Most households’ ability to withstand income shocks has diminished. The results of a stress test would be devastating. Half of all households in the UK receive some kind of state benefit. Almost by definition those reliant on income-related benefits have neither savings nor assets, notably the recipients of the 20% lowest household incomes.

“But the story does not end there. The ability to ride out an income loss without savage retrenchment depends on ‘free’ income and readily accessible savings or affordable credit. A large part of most disposable incomes goes on contractual or sticky spending items. Middle-income household savings consist largely of mortgage repayments and pension fund contributions. Rent takes a disproportionate share of younger household incomes. Car tax, house and car insurance, commuter costs, TV licences and mobile phone contracts leave little free spendable income. Much goes on eating and heating.

“If half of all households have less than 50% free income, a 10% disposable income loss necessitates 20% gut-wrenching retrenchment. Flat-lining real middle-income growth has left many households’ finances precarious.”

Having been hammered by the markets and the IMF, a scenario of recession, market crashes and collapsing house prices is a nightmare one for Truss. Her credibility is in tatters. She has been a disastrous leader, but the problem for the Tories is that there are no good options for British capitalism.