Populist policies only help populists

Good afternoon on what feels like a momentous day in British politics; one of those moments when the pendulum swings decisively, not just from one political party to another, but from one distinct flavour of government to another. 

Tony Blair offered a new kind of centrism in 1997, after the industrial and social crucible of the Thatcher years; now Sir Keir Starmer offers a return to competence and (somewhat portentously) “service” after eight years of political chaos that began with the 2016 EU referendum.

In the weeks and months ahead there will be plenty of time to discuss the future under Starmer’s Labour party — it’s going to be tough — but before we get there, the sudden calm of polling day after the hurly-burly of the campaign, feels like the moment to reflect. 

After spending more than a decade living abroad, I returned to Britain in 2016 to find a country that I hardly recognised, or rather did, but only from a previous job reporting on the US Tea Party movement and the nascent 2016 presidential campaign of Donald Trump.

The rise of Farage

When David Cameron in 2013 called for a referendum on the UK’s membership of the EU, it seemed like a cute move to heal the faultlines in his own party over Europe while neutering the UK Independence party under Nigel Farage, which was cannibalising the Tory vote.

And yet eight years on from the referendum — and nearly five years since Britain voted to ‘Get Brexit Done’ — the Tory party looks to be almost irrevocably split and Farage is riding higher than ever, with his latest vehicle, Reform, due to cost the Conservatives as many as 100 seats tonight. 

But the Conservative failure to snuff out the threat from Farage ultimately reflects the party’s inability to deliver effective government over the past five years. In trying to appease Farage, in many instances by aping his divisive policy platform, they have only empowered him.

Levelling up, a signature policy that could have been a vehicle for reconciliation and reform, became an administrative shambles that wasn’t under-girded by the reforms to council tax and local government finance that could have made a difference.

Brexit was never going to be good for the economy, but it didn’t have to be an international embarrassment for Britain, a monumental distraction that deterred investors and retarded economic growth at a time when the country could least afford it.

The Covid-19 pandemic provided cover for the transition period to be extended and the economic pretext for an EU deal to be struck that preserved more of UK trade. It wasn’t necessary to divide the United Kingdom in a way that created a border in the Irish Sea and led a British government to threaten to dishonour its legal and treaty commitments. 

Instead of a serious cost-benefit analysis of Brexit there was just a list of destructive and performative policies — promising to rip up all EU-era law inside a year, the Rwanda deportation scheme or thrusting international students unthinkingly into the UK culture war —  that served only to advertise the Conservatives’ failure to deliver on their own promises.

And the biggest beneficiaries of the Conservatives’ failure to deliver a Faragist platform in government? Why, Nigel Farage, of course, who has happily used the resulting chaos as a launch pad for yet another vehicle for his brand of zero-sum politics that pits “immigrants” against “natives”; “working” people against “elite”.

The cost of Brexit

That is the finding of a new academic paper by Eleonora Alabrese, Jacob Edenhofer, Thiemo Fetzer and Shizhuo Wang that analyses the costs of Brexit at a regional level by mapping actual economic output against a modelled counterfactual.

The modelling finds the “output losses due to Brexit” range from 5 to 10 percentage points of GDP against the “synthetic” economy (the modelled version, where Brexit didn’t happen) which is higher than many other estimates. 

Only Northern Ireland, which remains in a de facto customs union with the EU, escapes damage. The paper also finds that Brexit “levelled down” by hitting higher-output regions harder, so shrinking the gap with poorer places.

What’s doubly interesting is that when the economic losses are mapped on top of political choices, the authors find that support for Faragist right-wing populist parties goes up in areas that suffered an economic hit from Brexit — while support for the Conservatives does not. 

They find a “notable increase in right-wing vote shares in loser areas after 2016”, which indicates that “right-wing parties benefited from the economic discontent in these regions following Brexit”. 

They conclude:

“Overall, our discussion suggests that far-right populists can exploit regional inequalities and austerity to increase the political relevance of anti-immigration sentiment — either by changing people’s attitudes or making worries about immigration more salient — and that doing so can give rise to a lose-lose equilibrium, where some economic equalisation occurs by creating new ’loser’ areas that had previously been more resilient to austerity.”

In short, the same economic damage and social dislocation that is about to lead to the Conservative party’s hammering at the polls, is manna from heaven for populists such as Farage who feed cynically off failure and social division.

The analysis finds that Labour vote share also suffers from voter dissatisfaction after Brexit, but as my colleague Robert Shrimsley argues, when in government Labour might be well-served politically to blame the costs of Brexit more clearly on the Tories.

The takeaway of the past five years is that, if Labour wants to make a case for a second term in 2029, then it must deliver: new houses and hospital appointments; more apprenticeships and better high streets. 

It will be tough, after nearly two decades of austerity and under-investment, but there is no real alternative. Because divisive, rabble-rousing government, in the end, serves only the interests of rabble-rousers, like Farage, who have never had serious aspirations to govern.

Want help underst the election results? Inside Politics newsletter writer Stephen Bush and Political Fix podcast host Lucy Fisher will be joined by Political Editor George Parker and columnists Robert Shrimsley and Miranda Green tomorrow at 1pm to discuss the results during a subscriber-only webinar. Register now.

Britain in numbers

Talking of the challenges that lie ahead, today’s chart comes via the Local Government Association and shows how deep cuts to local government have been since 2010, with the average authority having 12 per cent less spending power.

In its manifesto, Labour acknowledged the “acute financial challenges” facing local government and has promised to provide multi-year funding settlements to provide the sector with greater stability. 

But there is no specific additional funding commitment for councils despite the sharp rise in the number facing bankruptcy. A survey by the LGA in December 2023 found almost one in five English councils were imminently at risk. 

All this at a time when demands on local councils are rising. According to LGA research the share of council spending on housing and homelessness tripled over the past decade, from £315mn in 2014 to more than £1bn last year. 

The LGA has a list of policy prescriptions, including reforming Right to Buy so that every council house sold is replaced by a new unit of social housing, and reversing Jeremy Hunt’s decision to have the central government retain much of the receipts from sales.

Ultimately, since governments stopped building meaningful numbers of houses after 1980, the market has failed to deliver the 300,000 homes a year that all parties agree need to be built to ease housing pressures.

Labour has made big claims around “getting Britain building again”, and one of the areas we’ll track closely in the next year is how radical a Starmer government is prepared to be to rebuild the stock of social housing to relieve pressure on local authorities.

The State of Britain is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.

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