Jonathon Shafi surveys the landscape as the Tories lose control

The period of “national unity” as part of the mourning period for the passing of the Queen feels like an age ago. In many ways this is not unexpected, given the morass Britain is currently in. Yet the scale of events was less predictable.

The new Chancellor in delivering his so-called “mini budget” has alarmed the markets and the economic mainstream to the extent that the pound fell to its lowest against the Dollar that at any point in history. Already, just days after taking office, Liz Truss and Kwasi Kwarteng have have had to retreat to the bunker. The wound, in my view terminal, is deep and self-inflicted.

The economic consequences will play out in the coming weeks. But there is little doubt that the situation represents a full blown crisis. As it becomes more acute, the government will have to take action. The Tory leadership effectively have two options. Either they reverse their budget proposals, or they present a programme of unprecedented spending cuts following a decade of austerity.

Some argue, with good reason, that a U-turn now is political suicide. Truss would have torched through any authority she had, and could only limp on. Already some Tories want Kwarteng to go. Others are sharpening their knives for Truss, remembering the relatively thin margin of her leadership victory. It won’t have gone unnoticed that she curated her cabinet in a way that carved out anyone associated with Rishi Sunak. She and her allies must carry the can.

With this being said, the alternative opens up potentially much larger problems. The scale of the spending cuts that may be required, up to £50 Billion a year, can only result in a massive scaling back of the public sector. As Charlie Bean, a former deputy governor of the Bank of England commented:

“Frankly, the only way you can really deal with this is with a very fundamental rethinking of the boundaries of the state. So if you want to get the share of government spending to GDP down, you have to be prepared, say, to move away from our own health service, which is free at the point of delivery to one funded by social insurance like they do in Germany.”

It may well be the case that the cult of the libertarian right has possessed the Conservative party. But the combination of removing bankers bonuses, tax relief for the rich and a new round of austerity to the extent that it destroys the NHS during a cost of living crisis, is not going to fly politically.

Much is at stake. Yes, the economy. Yes, the political fortunes of the Tory party. But also the international reputation of the British state and financial institutions. This crisis has potentially substantial consequences geopolitically, as war in Europe continues.

The intervention of the International Monetary Fund has been scoffed at by some Tories. That may be. But more serious parts of the British ruling class will not be so blasé, and are quickly losing patience with Tory ineptitude as trust in the party haemorrhages.

Out of the frying pan into the fryer

Many Tory members will be in a tailspin, wondering how it all came to this. Who could have expected this degree of political decline just three years after Boris Johnson stormed into Number 10 with an 80 seat landslide majority and the highest percentage of the popular vote for any party since 1979? To get a sense of why and how the Tories are in their current predicament, we need to have a grasp on the divisions which rack the party.

Of course the scandals around the partying under the former Prime Minister’s watch during lockdown contributed to his downfall. But in another time, these might have been covered up and papered over. This issue only comes into the public domain with such relentlessness because Johnson has internal opponents with the political will to put him to the sword, in order to take power themselves. As we noted in the aftermath of his eventual resignation:

“The divisions about the way forward for British capitalism are reflected in the establishment as a whole. Arguments around the nature and direction of the party represent the core of the Tory crisis, more so than the proximate political scandals that deluge the government. The Tories look so bedevilled because there are no easy answers for them, regardless of Johnson’s resignation. They lack a unified strategy, an agreed vision, and as a result a candidate who can command a sense of immediate authority.”

That sense of disunity is palpable. Rishi Sunak and his allies suffer the fate of a partial revolution. That while their opponent fell from power, they themselves didn’t manage to seize it in the process. This section of the party wanted to plug the organisation back into the CBI and to reanimate positive relationships with their European partners in the spirit of a vision of conservatism which has its roots in the Cameron era.

For them, kick starting another war of words with Macron, or unleashing an economic policy which prompts panicked interventions from the Bank of England, is the precise opposite of what a modern Conservative party should be doing.

They prefer a return to “competence” and “stability” after years of fractious splits and adventurism over Brexit, both inside the Tory party and between the government and the big battalions of British capitalism.

As if to illustrate the depth of the divisions, Sunak predicted the following during the leadership contest in relation to the Truss economic plan:

“There will be a run on sterling. The gilts market will be in freefall. And the FTSE will tumble as global investors take fright and sell off every form of British asset. It might take only a few days, or the government might stagger through until the end of September, but before long Liz Truss and her new Chancellor Kwasi Kwarteng will have been forced to call in the IMF to stabilise a collapsing economy.”

Truss is already cornered. Again, as is always the case in politics, choices are concrete. Some Tories accept their time in government is coming to an end. Perhaps a period in opposition is required to iron the party out and bring about some coherence. The whole establishment can console itself that the Labour Party is at least not in the hands of the likes of Jeremy Corbyn. Others might conclude that it is worth fighting the next election to win, but that this will require yet another change in leader. That, however, brings its own toil and trepidation.

Either way, the Tory infighting is not over as the multi-dimensional crises gather pace, and the issues at stake are not marginal ones. They are over major ideological and strategic questions over the whole future of conservatism in Britain. As it stands the party is in chaos just days after a leadership election without any indication that respite lies ahead.

That tells us a great deal about the profound nature of the crisis that is now, inextricably, in the bloodstream of the Tory party.

Labour government incoming?

It’s almost laughable to consider that hopeful Tories sought a poll bounce with their new leader installed. Unsurprisingly, their electoral fortunes have taken a nose dive. One poll puts the party 17 points behind Labour, a margin unseen since 2001, the golden years for Blair following the 1997 election victory, but before the Iraq war.

There has been a notable shift in the forecasts for the prospects of Keir Starmer. The political weather is changing, and in his direction. The chattering classes are on the one hand appalled by the Tories, and on the other assuaged by the purging of the radical left. As a result, they are in more generous mood when it comes to Labour. In Scotland, the former Tory MSP, Adam Tomkins, has even devoted a column to arguing in favour of a Labour government.

Starmer is now in a strong position, thanks to the disarray in the Tories, to recruit elite support to his project. We can expect favourable coverage in parts of the media previously hostile, alongside far warmer relations with organisations who represent the corporate sector. In my estimation, the long-term vision for Labour under Starmer is to transform the party into something akin to the Democrats in the United States.

In practice, this means that the unions will have less power and influence. Importantly, this will involved finding new sources of funding, largely from big business. Internal democracy will be “streamlined”, while the leading members of the cabinet will ride above the scrutiny of the party membership. Interestingly, the SNP leadership have provided something of a model in this regard.

It is not only on the Labour Right where Starmer enjoys support. He can also find reinforcements to his left. The Labour leader has managed to expunge left-wing and oppositional elements on the one hand, while maximising the support from the left commentariat on the other. Perhaps this says more about the state of the left than it does the abilities of Starmer. Regardless, it remains true.

Conferences are difficult events for party leaderships. They can become a site of rebellion and disunity. Any mistakes are made in the full glare of the assembled media. As such, they are tightly managed affairs. From Starmer’s perspective this Labour conference has been an overwhelming success, juxtaposed with the chaos in the markets steadily trashing the Tory reputation for economic “competence.”

The rendition of God Save the King was impeccable. He has felt no pressure to reinstate Corbyn. His newest adversary, Liz Truss, is already in hiding. He has assembled a unified cabinet that are clearly working as a team. His conference speech has been welcomed across a broad spectrum of Labour politics

Timing is everything. The confluence of events seems to favour Starmer’s coming bid for power. Of course, things can change. But you get the sense that the Tories fate is all but sealed.

In the words of one Tory MP: “This is an extinction level event…it’s all over.”

Scottish Questions

All of the above raises a series of questions related to the Scottish context and to many of the issues we have covered previously on Independence Captured. With that in mind, we can assess the impact of events on the national question and the SNP in relation to two broad fronts: the economy and the potential of a Labour government.

The strength of the Unionist argument has rested on economics. Perhaps people might be won to independence on democratic grounds, or because of widespread revulsion at the Tories and the Westminster establishment. But in the end, this could never form a stable and decisive majority because of the lack of an economic case.

Recent days have surely shaken this dynamic. Not only have we seen a collapse in the pound, ructions in the markets and an intervention from the IMF. We have also had it confirmed that the Bank of England took action in response to a potential run on pension funds which would have resulted in mass insolvencies. Two key arguments for the Union, the pound and pensions, have been thrown up in the air. In a future referendum, this episode could be grist to the mill of the pro-independence movement.

Yet the SNP leadership are pretty absent given the scale of events. They have deployed a series of holding lines, as usual. But the truth is they have been hamstrung by their own policy around currency, known as Sterlingisation. If you need to read up on this, I’ve written a detailed analysis on the topic here. In short, the SNP policy dictates that an “independent” Scotland would sacrifice economic control, which would be retained by the UK financial institutions.

Scotland would therefore be exposed to shocks that hit the pound. If Scotland was independent now, under the terms of the SNP prospectus, interest rates would be set in London. Higher interest rates would result in an increased debt bill, which the Scottish Government would have to service. Scotland would be in the midst of a very serious currency crisis, but without control of monetary policy. The country, far from exerting economic sovereignty, would be completely at the behest of UK Government and Bank of England decision making.

Many of us have been arguing for years that this approach was the death knell for any meaningful independence campaign. Tragically, the prospectus has been farmed out to Scotland’s leading corporate lobbyists, who have arrived at disastrous conclusions. Conclusions that are now so obviously unsuited to the period that they can only go back to the drawing board. Just consider for a moment the wasted years frittered away on an obviously failed policy.

This is why the SNP leadership are dancing around the edges of the ensuing crisis. They know that they don’t have a viable alternative to it. As a result, what should be an opportunity to make headway, is yet again missed.

Note that there is still no clarity on the economic case for independence. The “white papers” appear to have dried up. Of those already published, the “scene setting” paper already reads as if it was written in a different decade, while the second paper on democracy has been thoroughly dismantled as intellectually shallow and lacking in scope and ambition. On borders, currency, EU membership and much else, there is a gaping hole.

As has been repeated at regular intervals in this newsletter, the SNP orientate on independence mainly in public relations terms. It is primarily an electoral tool. Against that backdrop, we now turn to the potential of a Labour government and the parameters of the next General Election.

Firstly, it’s worth noting that Starmer pledged to set up a publicly owned energy initiative known as GB Energy. The devil is in the detail, as always. And a pledge in a conference speech is distant from implementation in the real world. But even at the level of rhetoric, this is an incursion into what should be an already well established plank of the independence case: bringing Scotland’s vast energy potential into public ownership.

As Ben Wray reflects:

“A Scotland based on energy sovereignty could drastically reduce its electricity costs by bringing its energy system into public ownership and ending fragmentation. Such a vision would leave Starmer’s ‘GB Energy’ in the dust, but the problem is that it is highly unlikely to be embraced by Sturgeon, since the idea of energy sovereignty would mean seeking a rupture with both the UK and EU’s neoliberal energy markets.

“Sturgeon and the wider SNP leadership have been at pains to say that independence would mean deeper integration into international markets, even at the expense of the country’s economic sovereignty. The Growth Commission vision for an independent Scotland, authored by corporate lobbyist Andrew Wilson and officially endorsed by the party, argues that energy policy should “prioritise the commercialisation and growth of new sectors with export potential”.

The independence cause is being hampered, yet again, by the SNP leadership. In the space of a few days the urgent need for a well articulated proposal for an independent currency, and the lack of vision around Scotland’s energy future, has been badly exposed.

This reveals a deeper problem with the SNP approach to independence. Because it is based on integration to the prevailing orthodoxies rather than an alternative to them, it can’t provide the intellectual ballast required for an era like this. The result is that as each and every crisis comes and goes, the case for independence remains either missing or paralysed.

The best the SNP strategists appear to be able to come up to counter Starmer’s Labour is to say that his party is “pro-Brexit.” Sorry, but this just won’t do. It might, on a good day, capture some votes in an election. But the terrain in that regard is less fertile now than it was in 2019.

In the end “stop Brexit” was always sloganeering for electoral purposes. I argued some time ago in the Herald that the SNP should drop their obsession with Brexit and focus on independence. Even if you disagree with that position, it is astounding that after all these years the SNP can’t point to a viable route for an independent Scotland to re-join the EU. They simply haven’t done the work. The result? Once more the party is reduced to electoral propaganda rather than putting forward a robust case for independence.

This is because the SNP “strategy” around independence is based on the party’s electoral fortunes, and little else. Thus the “de facto” referendum is simply a ploy to ensure the SNP have a strong position on independence in an election where removing the Tories from power will reach fever pitch.

If voters feel that the SNP can’t deliver a break from Westminster, they will be more susceptible to voting Labour if only to remove the Tories from power. As such, the SNP will seek to polarise the election around the national question. That might be a smart strategy to win SNP votes, but it doesn’t take Scotland any closer to independence.

Recent events highlight the fragility of the Union. Of that there is no doubt. But they also expose the lack of planning, and the absence of an independence strategy, when it comes to the SNP leadership.

Reposted from Independence Captured, subscribe here