The Economic Consequences of Douglas Carswell

In the small hours of Friday morning, when most of my fellow economics scribes were in Washington at the annual meetings of the World Bank and International Monetary Fund, I was eating cheese on toast on my sofa. With Labour having just held on in Heywood and Middleton by-election, there was I, like the rest of the UK’s political obsessives, staring at the television bug-eyed, awaiting Clacton’s verdict.

I’m not a Ukip supporter and Carswell isn’t a personal friend. Yet, as I wrote three days after he defected from the Tories, I really wanted the member for Clacton to hold his Commons seat. That because, over many years of talking to MPs and ministers of all parties, he’s one of the few politicians I’ve encountered who has truly grasped the realities of the Western world’s current economic predicament.

Carswell is not only prepared to think through our unpalatable challenges – on-going large deficits, vast public and private debts, weak productivity and potentially disastrous demography. He’ll also openly discuss tough proposals, speaking truth to power and saying what needs to be said.

Almost anyone with Carswell’s considerable ability and media skills, having entered the Commons as a Tory, would have kept their nose clean, climbed the greasy pole and made an early bid for the cabinet. The trappings of power were there for the taking, maybe even one of the great offices of state.

Carswell, though, is among just a handful of credible politicians who’s refused to let his ambition outweigh his intellect. Sticking to his principles, he hasn’t shied away from the pressing problems mainstream politicians don’t want to face. That’s why, to my mind, his staying in Parliament was far more important than which party he represents.

Now he’s won, though, having polled a massive 60pc of the vote, the returning Clacton MP’s party affiliation is deeply significant. As Ukip’s first elected member, Carswell can table Ukip parliamentary motions and lay Ukip amendments to legislation. He can question the Prime Minister on television and hold ministers to account. Above all, he can play a leading role in determining his new party’s economic platform ahead of the May 2015 general election and beyond.

Critics complain Ukip is a protest group, lacking serious policies beyond Europe and immigration. Well, now Carswell has the opportunity to shape an entire economic manifesto which, given his poster boy status and the media’s escalating interest in Ukip, is certain to command attention.

Carswellian economics, in other words, is about to hit the mainstream. That’s good, because the man talks sense. He holds views, moreover, that are widely held in the real world but which the traditional parties and their media lackeys have managed to exile to the fringes of our national debate.

Ministers will tell you, for instance, that our “too big to fail” banks have been fixed and the Vickers proposals, imposing Chinese walls between ordinary deposits, and high-risk investment banking activity, mean we’ll avoid another disastrous meltdown. Carswell, though, remains a forceful advocate of meaningful banking reform. “Several years on from the banking collapse, not a lot has changed,” he says. “Many banks remain zombies, dependent on vast state handouts. And as for reform, there’s been a lot of talk … and not much else”.

That’s exactly right. Numerous senior figures in politics and financial services admit privately that the Vickers “ring-fence” is inadequate and our banking sector remains extremely vulnerable, still posing a grave danger to our public finances and the broader economy. Many voters also sense the problem hasn’t been solved, and the economy remains vulnerable to our top-heavy banking sector, but have concluded our political leaders lack the guts to tackle the fierce vested interests involved.

As a Tory MP, Carswell has pushed hard for structural changes to our banking system, agitating within Parliament, tabling amendments, proposing entirely new legislation, trying to keep the flame of root-and-branch bank reform alive. In his new guise, Carswell and Ukip now have a chance to re-ignite this debate, challenging the main parties in Parliament on this vital issue and advancing radical manifesto pledges on banking – that will now, inevitably, be subject to detailed public scrutiny.

It’s striking that, even in his brief Clacton acceptance speech, Carswell put down a marker on this crucial subject. “Crony corporatism is not the free market,” he said. “Change is coming … whether you sit astride a mass of power in Westminster or in banking”.

On fiscal policy, Carswell now has a broader opportunity to use his Ukip Westminster perch to highlight – and keep highlighting – just what a state we’re in. Since April, the underlying fiscal deficit has been £2.6bn greater than during the same period in 2013/14. Despite much faster economic growth, we’re on course to borrow more during this fiscal year than last.

Britain looks set to chalk up another £100bn-plus annual deficit in 2014/15, the sixth in a row. Even now, with interest rates at rock-bottom, and the market for sovereign debt effectively rigged by virtual money-printing, we’re spending far more taxpayers’ money on debt-interest than on defence and almost the same as on education. And interest rates can only go up.

Spending and borrowing are soaring, with the UK’s national debt at £1,410bn, almost £40,000 for each taxpayer and twice what is was when the Tories took office in 2010. Yet no mainstream party wants to know. Leading politicians, both Labour and Tory regularly conflate “deficit” and “debt” – all the better to avoid having to face reality. Ed Miliband “forgets” to mention our fiscal woes during his conference speech, in a crass illustration of the determination of our political classes to kick tough issues into the long grass.

Carswell has long railed against fiscal complacency. While a Conservative MP, he frequently attacked George Osborne, highlighting that the Chancellor is borrowing more over five years than his predecessor Gordon Brown did in ten. “Sooner or later,” Carswell wrote, “Osbrown economics will not only fail but will be recognized as having failed”. Such views, shared by many financial literate and even expert people outside the Westminster bubble, have long been consigned to the margins of our national discourse. Given the new interest in Carswell and Ukip, our fiscal debate could be about to get real.

On European Union membership, too, Ukip’s Parliamentary presence, and the very real prospect of further defections, will do much to focus the government’s mind. We need a proper negotiation with Brussels, with Britain prepared to quit if we don’t get what much of what we want. For too long, the Prime Minister has given the impression that, during a referendum, he’d campaign to stay in. That’s no basis for a tough negotiation – and with Ukip now at Westminster, it’s a position that won’t survive.

In Washington, the International Monetary Fund issued a downbeat outlook for the global economy. The eurozone looks particularly shaky, with the French economy stalled and even Germany struggling, all of which threatens the UK’s recovery.

For me, though, it was Clacton that provided last week’s news of enduring significance. Ukip have cracked the first-past-the-post code, gaining a Westminster foothold. The serious and intense scrutiny they’ll now face is also an opportunity – to place before the electorate an honest view of our economy, breaking the stranglehold of infantile debate and putting forward a genuine assessment of what we can and can’t afford.

It may not happen. Ukip may yet be captured by caution and vested interests. Farage and Carswell could come to blows. There’s a chance, though, just a chance, that Clacton marks the start of a revolution in British economic policy.

1 comment
  1. Robert Wike said:

    A point well made about Douglas Carswell’s views of the increasing national debt.
    It seems that the increased short term economic performance, arising as a result of incurring this debt, is that the EU has increased the UK budget contribution.
    When the debt has to be paid, will the EU reduce the UK’s contribution?

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