Blair is closer than ever to regaining political power, albeit through a proxy Labour government led by Keir Starmer. The beauty (for Blair) is that he will be able to continue expanding his global political consulting empire at the same time.
One of the great contradictions of British political life over the past 15 years is Sir Tony Blair. The three-term prime minister is broadly reviled by the British public, even among many Labour Party voters, yet he continues to be feted and fawned over by the British establishment and media. Even after the “crushing verdict” (in The Guardian‘s words) of the Chilcott Inquiry — that the Blair government’s case for the Iraq war was “deficient” — was finally made public in 2016, Blair remained a go-to person for the British and international media on all manner of topics, particularly the COVID-19 pandemic.
It is a very different story for the British public. In a recent YouGov opinion poll, only 22% of respondents said Blair had had a positive effect on the Labour Party, with 38% saying his impact was broadly negative. Even among Labour Party voters, only 26% labelled his impact as positive compared to 38% who saw it as negative. According to another YouGov survey, this time from 2022, a mere 14% approved of his knighthood and only 3% strongly so, while 63% disapproved, 41% strongly so. Over a million people signed a petition demanding the knighthood be revoked.
In other words, the last thing most people in the UK want to see is Blair making a political comeback. Yet the former PM is closer than ever to regaining political power, albeit through a proxy Labour Party government led by the current party leader, Keir Starmer, who is hotly tipped to win the next general election, which must take place by January 28, 2025. Starmer is favourite to win not because of a groundswell of support for his vision or candidacy — the UK public view the party under Starmer even less favourably than under Ed Miliband — but because support for the governing (if you can call it that) Conservative Party is in freefall:
Remarkable data, the UK public actually view the Labour Party under Keir Starmer's as far less capable than it was under the tepid Ed Miliband, and yet the useless plank Starmer is destined to become PM entirely thanks to the Tory's self-destruction. pic.twitter.com/pERhtWG53y
— Matt Thomas (@Trickyjabs) April 22, 2024
Blair will probably have no official role in the resulting Starmer government, but he will wield plenty of power from behind the scenes. The beauty of such an arrangement (for Blair) is that he will have zero public accountability or responsibility while at the same time being able to continue serving his corporate clients and expanding his global political consulting empire.
Many of the key positions in a Starmer government will be filled by members of the Blairite wing of the Labour Party, which has spent the past four years purging the party of its genuine left-wing politicians and members, including former party leader, Jeremy Corbyn, and the veteran British filmmaker Ken Loach. As the veteran US journalist Robert Kuttner writes, Starmer “has virtually outsourced his entire program to Tony Blair” and his modestly named non-profit foundation, the Tony Blair Institute for Global Change (often shortened to TBI).
TBI was spawned in 2017 by rolling together all of Blair’s for-profit and non-profit ventures, including the Tony Blair Faith Foundation, the Tony Blair Sports Foundation, the Tony Blair Governance Initiative, and his consulting firm Tony Blair Associates, into one vehicle. Some of those ventures had begun to attract a little too much attention for their opaque tax structures, fragrant conflicts of interest and dodgy client lists, including the despotic governments of Saudi Arabia, Kazakhstan and Azerbaijan – all, of course, rich in mineral deposits. TBI continues to take money from the Saudis as well as large corporations and philanthropic foundations.
As Sam Leith writes in The Spectator, the Institute is symptomatic of the post-democratic world we live in today:
It seems to me that what’s interesting about the Tony Blair Institute is that it’s a newish kind of thing, maybe even a post-democratic kind of thing. It looks like a thought-through response to the recognition that international policy, in many of the respects that matter, has been substantially privatised.
It has been a commonplace since Blair was prime minister that the largest corporations now have more power than most nation-states. Their influence on tax and regulatory regimes, directly and indirectly, is considerable, and with it, their influence on the direction of national and international policy. Google and Amazon do more to determine the shape of the world and the lives of its citizens than all but a few elected politicians.
A recent feature article in the London Times, titled “Tony Blair: Politics Is for the Weird and the Wealthy”, provides a glimpse of just how much influence Blair and TBI are likely to wield during a Starmer government:
Starmer, who shared a stage with Blair at the TBI’s Future of Britain conference last summer, has populated his team with Blairites — including the former Blair special adviser Matthew Doyle, now Starmer’s director of communications; the former Blair strategist and speechwriter Peter Hyman, who is a senior adviser; and another former Blair special adviser, Peter Kyle, now the shadow science secretary. In particular Kyle and Wes Streeting, the glossy shadow health secretary, are said to act as Blair’s emissaries around the shadow cabinet table.
Marianna McFadden, previously “head of insight” at the TBI, is deputy to Starmer’s campaign director, Morgan McSweeney. Working with them is Marianna’s husband, Pat McFadden, a Blair government veteran who is Labour’s election campaign chief. He says: “One of the good things Keir has done is to tell the Labour Party and the country that he’s really proud of what Labour’s done in government. We went through a period of time after 2010 when we weren’t telling the Labour Party and the country that, and that’s a welcome change.”
McFadden describes the TBI as a “useful resource for different members of the shadow cabinet”. “Curiosity is an essential function of leadership, and people who want to occupy positions of government responsibility have a duty to be curious about technological change,” he says. “In an era of tight money, where so much of the debate is around fiscal events and headroom, you need a broader debate. I’m not saying that public services don’t need investment — of course they do — but there is also going to be interest in how services can be reformed and whether technology can help you get greater productivity.”
Blair’s Digital Nirvana
For Blair and his namesake non-profit, technology is invariably the solution to most of the world’s problems. There is an almost evangelical zeal to Blair’s faith in digital technologies, including biometrics. As the Times article notes, Blair’s prescriptions are, unsurprisingly, technocratic. They include promoting the full gamut of “digital public infrastructure”, or DPI, currently being rolled out in countries across the Global South, often with World Bank loans and financing from billionaire philanthro-capitalists like Bill Gates and Pierre Omidyar.
Since leaving politics in 2007, Blair’s global influence has, if anything, grown, thanks largely to the expanding influence of TBI. As the FT reported last June, TBI has in effect become a global consultancy to the UK government, giving advice on a whole host of issues. It has over $100 million and is currently active in 40 other countries, including the United States. Most, however, are in the global south/majority, where TBI advises governments on DPI such as digital vaccine certificates, digital identity and central bank digital currency.
In January 2021, Blair made one of the most Orwellian statements of the COVID-19 pandemic. “In the end,” he said in an interview with ITV News, “vaccination is going to be your route to liberty.” At one point he called unvaccinated people “idiots” and repeatedly urged the UK government to introduce vaccine passes. What he didn’t say was that his foundation, the Tony Blair Institute for Global Change, or TBI, had received millions of dollars in donations from pro-vaccine organisations such as the Bill and Melinda Gates Foundation.
A year later, he joined forces with his erstwhile rival William Hague to call for the introduction of a digital identity system as part of a “fundamental reshaping of the state around technology”. As prime minister, Blair tried but failed to introduce an identity card system in the UK. Now, his foundation is promoting digital identity programs around the world, including to many authoritarian regimes. A report by the NYU School of Law’s Center for Human Rights and Global Justice (CHRGJ) warns that the emerging digital ID infrastructure has already “been linked to severe and large-scale human rights violations in a range of countries around the world, affecting social, civil, and political rights.”
This does not appear to even register as an issue for Blair. As always, he has an unbending faith in his own judgement of what is needed for the world to become a better place. Whether it is the need for “humanitarian” military intervention in the 1990s and 2000s or to digitalise everything, including government, health, banking and payment services, Blair and his associates know best.
In a speech at the World Economic Forum’s 2020 cyber attack simulation event, “Cyber Polygon”, he told the event’s participants that Digital Identity would form an “inevitable” part of the digital ecosystem being constructed around us, and so government should work with technology companies to regulate their use — as the EU has just done. It is the perfect manifestation of the 21st century Public Private Partnership — a digital panopticon designed and built by global tech companies, paid for with taxpayer funds, so that the government, security agencies and their corporate partners can more easily track, trace and control the populace.
July 2020: Speaking as part of the WEF's annual 'Cyber Polygon' event, former UK PM Tony Blair—who was instrumental in opening the UK's floodgates to mass, uncontrolled immigration—touts the need for digital ID in determining "who has the right to be in your country".… pic.twitter.com/Ru4uMYake8
— Wide Awake Media (@wideawake_media) March 26, 2024
“A Fraud on the People”
The Hague-Blair duo has also called for the UK’s struggling National Health Service (NHS) to sell off its patients’ health data “to fund cutting-edge treatments” and raise much-needed money for the crumbling healthcare system. One of the main reasons why the NHS is so short of cash is the Private Finance Initiative (PFI) that Blair’s predecessor, John Major, created in 1992 but which Blair’s government massively expanded. As The Independent reported in 2018, PFI ended up burdening the State with more than £300bn in debt — for infrastructure projects with a face value of £54.7bn.
PFI, and its latest incarnation, PF2, allowed bankers and financial consultants to gorge on massively inflated interest rates and fees for run-of-the-mill infrastructure projects, while saddling taxpayers with debts they will struggle to repay. For over two decades. It was effectively “a fraud on the people”, as one of the biggest beneficiaries of PFI all but admitted a few years ago:
Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), recently made an astonishing admission on BBC1’s Question Time when he stated that private finance initiatives (PFI) had been a “fraud on the people”. Beyond seemingly populist rhetoric, the real story of PFI reveals that RBS alongside other global banks, notably HSBC, were instrumental in what Sir Howard has effectively labelled a great heist.
Blair is also far from a neutral voice on the issue of selling NHS health data. TBI’s principal donor is Larry Ellison, the world’s fourth-richest man and owner of the Silicon Valley giant Oracle which aspires to become the world’s most important online medical data company using its cloud technology. In 2022, Oracle bought the US electronic health records giant Cerner last year for $28 billion. The company’s ultimate goal is to build a united national health database amalgamating thousands of separate hospital databases.
Blair’s financial ties with Ellison clearly represent at least a potential conflict of interest and one that should be at least disclosed in any interview, article or report discussing Blair’s calls for NHS patient data to be sold to third party companies — which could, of course, include Oracle. It also goes without saying that issues around digital technology (digital vaccine certificates digital ID, CBDCs, biometric identifiers, digital censorship, digital health data…) will feature heavily in a Starmer / Blair 2.0 government.
Kowtowing to the City, Again
Let’s also not forget the crucial role Blair played in cementing Thatcher’s economic legacy during his ten years in power. Thatcher even cited Blair as her greatest accomplishment while Blair for his part openly admitted in 2013, in the wake of Thatcher’s death, that his job as PM had been to “build on some of the things [Thatcher] had done rather than reverse them”. As Kuttner notes, it was Tony Blair and his US soul mate, Bill Clinton, who consolidated neoliberal economics as the only option:
Both Clinton’s New Democrats and Blair’s New Labour turned away from progressivism and working families in favor of globalist corporate financial elites. Neoliberal deregulation of finance (NC: particularly the emerging derivatives markets) produced the economic collapse in 2008.
The failure of the center-left party to maximize the moment, contain capital, and rebuild a pro-worker economy led to the defection of working-class voters and ultimately to Trump in the U.S. and Brexit in the U.K.
It is hard to forget just how obsequious Blair’s New Labour was to the City of London. In a speech at the Mansion House in 2007, Blair’s long-time frenemy and then-Chancellor of the Exchequer, Gordon Brown, congratulated himself for “resisting pressure” to toughen up regulation of the City’s activities. As Andrew Rawnsley reported in The Guardian, Brown declared that:
Everyone needed to follow the City’s ‘great example’, emulate this ‘high value-added, talent-driven industry’. ‘Britain needs more of the vigour, ingenuity and aspiration that you already demonstrate.’ Thanks to their ‘remarkable achievements’, we had the huge privilege to live in ‘an era that history will record as the beginning of a new Golden Age’.
As in the US, once the bubble burst and the financial edifice came tumbling down, there was no great reckoning, or indeed any reckoning of any kind. There was a shift in the language, however. What Brown had hailed as “a golden age” he now suddenly deplored as an “age of irresponsibility.”
By then, of course, Blair had already left politics and had walked straight into a plush senior advisory role with the US’ biggest lender, JP Morgan Chase — a position he holds to this day. In 2022, the former prime minister was named by a JPM whistleblower as one of a number of parties to have received improperly processed “emergency payments” from the bank.
A Starmer government, if anything, could be even worse than Blair’s. In the comments thread to a recent post of mine, Colonel Smithers, a regular NC commentator who is UK power politics adjacent, suggested that the next Labour government will be even more in thrall to the City of London than Blair or Brown’s:
From late November, I have become involved with the trade body representing foreign banks operating in the City, including their engagement with Labour. What you report is the tip of the iceberg.
Labour’s leader and its Treasury team told us that “the City is a force for good” and “Labour has the City’s back” and “every day, every month and every year of a Labour government, it will maintain its credibility with the markets and enhance relations with investors”… This includes a balanced budget, if not a budget surplus, and funding solely from tax.
Labour would like the City to fund its programme, partner at all levels of government and second staff to all levels of government, including economic development, education and land use planning. It sees no role for unions and civil society. Labour’s definition of “an active state” is where the government “is stable and ensures all the levers pull in the same direction”.
Labour is not interested in “opposition for opposition’s sake” and “has moved on from student t shirt politics”.
Blair’s team, which has many young former civil servants, and Mandelson are working on Labour’s “bomb proof” manifesto. They have banksters from Barclays, HSBC, Citi, Goldman Sachs and JP Morgan and staff from private equity on secondment.
Later this month, we have a session with the Labour health and development leads, Wes Streeting and Lisa Nandy. Labour is keen to mobilise City investment and expertise to reform healthcare and overseas development.
Streeting is a protege… and has the Blair and Mandelson machine in his corner for the succession to Starmer, which many Blairites hope will be sooner rather than later.
The party’s kowtowing to the City was recently on full display when it decided to abandon a popular policy commitment to curb excessive banker bonuses. The general secretary of the Labour-affiliated Fire Brigades Union (FBU) Matt Wrack summed up the general public’s response in a comment on X (formerly Twitter), describing the U-turn as “an utterly daft approach” to public policy:
“Tackling abuse by wealthy bankers would be a popular move and a vote winner. The desperation from Starmer’s team to win approval from the people who run the finance industry is appalling.”
“Resetting” UK’s Relationship with EU
A Blair/Starmer government will probably be even more subservient to US corporate, financial and geopolitical interests than the current Sunak government, if such a thing is possible. As Declassified UK reported last year, Starmer served on the Trilateral Commission “alongside two former heads of the CIA without telling Jeremy Corbyn—who would have blocked it.” The group was founded in 1973 by billionaire banker David Rockefeller as a networking platform for elites from the US, Europe and Japan, and is closely tied to US and UK intelligence.
Here is Noam Chomsky giving a little historical background on the organisation:
Lest we forget, Starmer played a leading role in the persecution prosecution of Julian Assange. As Director of Public Prosecutions (DPP) from 2008-13, Starmer oversaw Julian Assange’s proposed extradition to Sweden to face questioning over sexual assault allegations. During that period he visited Washington four times while the CPS under his stewardship was marred by procedural irregularities surrounding Assange’s case, including the destruction of key emails relating to the case and documents pertaining to Starmer’s trips to Washington.
While Starmer is likely to place the UK even deeper under the US’ thumb, Blair is determined to “reset” the UK’s relationship with the EU. From the Times interview:
There is also Britain’s relationship with Europe. “It would be wise to reset it,” Blair says. “There are too many things that affect us that are going on in Europe. That doesn’t mean to say [Starmer] will start trying to frame this as rejoining [the EU] or even the single market. In any event, we’ve got a trade negotiation coming up in 2025. But at the moment we’re outside the big political union on our own continent and we’ve got a disrupted trading relationship with our biggest trading partner, so you’ve got to fix this stuff.
Blair has always viewed the 2016 Brexit vote with unbridled contempt, even going so far as to describe it as a “coup” in the immediate aftermath of the vote. As the former bank regulator and white-collar crime lawyer Bill Black related in a piece cross-posted by Naked Capitalism, Blair’s real beef is with “populism”:
He is enraged that the UK voters “demonized” “the experts” who warned that BREXIT would cause an economic catastrophe. He is appalled that “the left” in the UK is appalled by the conduct of the City’s bankers that became wealthy by gutting and filleting their customers to the tune of 50 billion pounds on payment protection insurance (PPI), ran the two largest cartels in world history, made hundreds of billions of pounds in “liar’s” loans, laundered money for drug cartels, kleptocrats, and terrorists, and nations trying to develop nuclear weapons, and helped elites worldwide evade paying their taxes.
The bankers’ frauds made them spectacularly wealthy and drove the financial crisis. Blair’s destruction of effective financial regulation and supervision made all of this possible. As in the United States, the elite bankers were able to become ultra-wealthy by leading these frauds and scams with complete impunity from prosecution. But Blair is appalled that “the left” wants to restore the rule of law to the City of London’s elite bankers. Blair is outraged that after the sordid record of the bankers’ crimes, abuses, and staggering incompetence the public refused to defer to those bankers as “the experts” on BREXIT.
Blair has stuck firm to his position on Brexit. Here he is presenting a fairly compelling case for why it is in the UK’s long-term geopolitical interest to stay in the EU — compelling, that is, in the year 2019 when the EU still looked like a reasonably strong, cohesive unit with a functioning industrial economy that hadn’t been decimated by a dozen rounds of backfiring sanctions on its main energy supplier:
Listen to Blair’s reflections on Brexit in 2019! Right on! pic.twitter.com/fRgFSbk7hG
— Cary Cooper (@ProfCaryCooper) May 1, 2024
As Blair prepares for his return to frontline politics in the UK, albeit through proxies in Kier Starmer’s cabinet, questions are being asked, particularly in the right-wing press, about just how far a Starmer government is prepared to go to reverse Brexit.
Like Blair, Starmer is a staunch remainer. Days after the referendum, he described the result as “catastrophic for the UK, for our communities and for the next generation.” Jeremy Corbyn went on to commit a rookie error by appointing Starmer as shadow Brexit secretary from 2016-19 — a rookie error. As Declassified UK notes, “in this role he was integral to the push for a second referendum on exiting the European Union, a position that many fault for Labour’s catastrophic performance in the 2019 election.”
France and Germany are now championing an “associate membership” proposal that would involve Britain observing EU law and accepting a form of free movement in return for access to the single market. French Premier Emmanuel Macron is apparently very keen on the idea. According to an EU source cited by the euro-sceptic tabloid, the Daily Mail, “the deal had been drawn up with Labour in mind and was ‘carefully balanced politically to be a potential place for Britain without the need to ever rejoin the EU or to hold a referendum'”.
It is an offer that hopefully even Starmer and Blair will refuse, given that it will essentially mean that the UK continues to be subject to EU laws while having no means of influencing them. The Labour Party has so far rejected the proposal, saying it is not interested in reopening the old wounds, and only hopes to “improve” the Brexit deal negotiated by the Boris Johnson government. But even that will come at a price.
In an interview with Bloomberg in November, Blair talked about “carving out blocks of cooperation” with the EU. “For Britain to be absent from Europe is a real problem for us,” he said. “However, having left it, getting back in is a real tricky, tricky negotiation.” If anyone is willing and able to pull it off, regardless of the dire consequences it could have for the already anemic levels of political trust and support in the UK, it is Tony Blair.
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I attended several Labour party conferences prior to Blair’s first victory. Even then the rank and file hated him personally, but they wanted ‘power’. I am now ashamed to say that despite this I voted for his party at that election. He is poison.
Don´t be too hard on yourself. I did the same in Germany when voting for Schröder 1998. (It would also be the last time.) In fact countless people did who have long abandonded the traitors of social democracy since. After all initially those were alliances between old labour / SPD and new labour. It wasn´t entirely clear what would happen. None of us had a crystal ball.
As for Blair, his first win I remember well, at that time I was at the so-called Cambridge Institute, then a language school in Germany. And everybody, staff and students alike was beaming with hope and great expectations. Different times. We have learned our lesson.
And many thx for this piece.
Even worse, I voted for the Greens for Munich town council. That was back in the 90s. Never again.
Hey, Americans often vote for “their” side and think that “winning” is the most important thing. Democrats and Republicans both are often this.
Anyways, Mr. Blair is doing the same as the Clintons since the days of the DLC or Democratic Leadership Council put the shiv in the remaining New Deal Democrats (or are the Clintons doing the same as Blair? Does it matter?). If you don’t have a side that is supposedly yours, win instead by voting for the Lesser Evil. It’s genius politics.
One has to wonder if his predecessor, and far more of a social democrat if not socialist, met his untimely death via foul play.
Thank you, John.
Please don’t forget the Orange Book and public school Liberal coup against Charles Kennedy.
Nick Clegg, like Red Ted Balls, was a Tory at Oxford and, using his Tory connections, got a job with Leon Brittan, a friend of his father, in Brussels.
Was there an autopsy?
This article is the product of ‘hidden elites’ journalism and paranoia. The Labour Party does not represent anything substantially (or minimally) different from the Tories, either in domestic or foreign policy. The Left in Britain (a lame bunch at the best of times) has vanished not because Starmer or anyone else has obliterated it, but because it has no social support. Without a social constituency, it is impossible to do any kind of politics. The working classes moan and grumble endlessly – but their outlook is staid and conservative when not reactionary. Why on earth would British capitalism and the Establishment need Blair to manipulate a Starmer government behind the scenes? It does not make any sense.
This is a stunningly counterfactual remark and a nasty and unwarranted attack on the author too.
Where were you when Jeremy Corbyn, who was extremely effective at rallying the traditional working class Labour left, was on the receiving end of an aggressive and sustained campaign to discredit him, with the bogus charge that he was anti-Semitic at its centerpiece. It admittedly did not help that Corbyn had only been a back-bencher and thus probably not all that skilled at ugly infighting.
Or how about George Galloway’s recent stunning success in a by-election in Rochdale on a traditional left wing platform, and his plan to run many candidates for his Workers Party of Britain in the upcoming elections?
Thank you.
Your first sentence is inaccurate and offensive. Having gone to senior school and later worked with and for such elites, as a banker and lobbyist, the sensible ones operate and thrive in the shadows. You won’t see them in the Sunday Times Rich List, at Spectator summer and Christmas receptions, or politics and even business programmes.
You are also unfair on grass roots Labour. The left wing and class focused platforms on offer from Corbyn, Galloway and independents now being marshalled and trained by some leftist former civil servants won and are gaining support.
To answer your question.
Starmer is a bureaucrat lawyer and not that well informed about and largely uninterested in issues beyond his narrow legal training. The organisation behind his leadership is Blair’s, but the confidence in Starmer is not there due to the above reasons. On his own and facing people who know their stuff, Starmer struggles and resorts to cliches.
Starmer’s main ally in the shadow cabinet is Rachel Reeves, another wooden performer and renowned plagiarist. He has no real ideological anchor, heartfelt following and would be easily buffeted by what Harold MacMillan called events.
Starmer ran on a platform of Corbynism with competence and without Corbyn. He would not have won the leadership on anything else. Even Blair’s long-term candidate Streeting says he will run on the left and swiftly tack right.
Blair and his sock puppets still regret not having a candidate in the summer of 2007, not rallying behind one in 2010 and 2015 and having a dismal one, Owen Smith, in 2016. From the summer of 2019, if not earlier, the Blair machine got into gear to promote the dullard.
“The Labour Party does not represent anything substantially (or minimally) different from the Tories, either in domestic or foreign policy.”
This is entirely intentional. You can choose between carefully curated corporate imperialist Labour muppet or the carefully curated corporate imperialist Tory muppet.
Basically a question of style.
As Luongo says, Monty Python, James Bond and Downton Abbey are quite enough of the Brits for me in Deplorable Flyover. No thank you. And perhaps the 20 year olds are smarter than they were 110 years ago, as the likes of Carville are finding out.
Noooooooooo! I’m sorry. Did I type that out aloud? It was bad enough seeing ‘porky’ Cameron make a comeback after leading the UK into Brexit. Here it is worse as it seems that he wants to be the power behind the throne so that he can still financially benefit from his wheeling dealings while not having to account for it as he is not an official part of the government. Nick gives us chapter and verse why he should never be allowed anywhere near the levers of power and yet the powers that be keep on bringing him back no matter how much he is despised by the people of the UK. Like the EU’s Ursula von der Leyen, wherever he goes he leaves a trail of corruption. His return is only impossible in the present political setup in the UK where one party is imploding while there is little enthusiasm for the other party which has the same exact policies. UK politics has stalled out and at present there is no way out which is how people like Blair can come in the back door.
Nightmare scenario: Blair and Clinton, either one, return to the scene. You can practically smell the sulphur.
Yes, speaking of sulfur smells: Might as well bring back Bush Jr. and Dirty Dick while we are at it. Public opinion is irrelevant
This is a very useful article. Unfortunately, whilst Blair is widely loathed, he still – bizarrely – commands influence and respect amongst much of the broadsheet press. This is perhaps not only because of money but that the broadsheets are edited by a generation who came of political age in the 1980s and 1990s, who have profited from capital gains and who are wedded to the TINA outlook which Blair exemplified. In other words, Thatcher’s children. The UK will probably be stuck with this until that generation passes from the scene.
However, the British themselves are really at fault. In the 1960s a gap opened between entrenched expectations of rising living standards and the actual ability of the real economy to deliver on those expectations. The gap was closed politically by permitting inflationary wage claims on the part of the unions and by the much more potent mechanism of capital gains for the middle class.
Some history is required here. In 1777 Lord North introduced a tax upon the imputed rent derived from owner occupation to help pay for the revolutionary war. This was taken from Adam Smith’s suggestion in chapter II of book 5 of The Wealth of Nations, which noted that everyone is in a landlord and tenant relationship, receiving or paying rent. It is just that an owner occupier is both landlord and tenant receiving an imputed rent as landlord from him/herself as tenant. This should be treated as taxable income. When the Younger Pitt introduced his first income tax in 1799, the imputed rent was taxed; it became Schedule A under Addington’s revised income tax 3 years’ later. Income tax was abolished by Vansittart in 1816 and re-introduced by Peel and Goulburn in accordance with Addington’s formulation in 1841. Schedule A was for long the biggest earner. Every 5 years a surveyor would assess every owner occupied home and determine the imputed rent.
The last assessments occurred in 1935-36. In 1940 they were suspended by Wood as surveyors were overwhelmed by war damage assessment claims, as they still were in 1945 and 1950. By 1955 the 1935 valuations were way out of date, so RICS (the surveyors’ association) lobbied for Schedule A abolition (it was low margin work for them), as did the rank and file of the Tory party, who were keen to develop a Skeltonite ‘property owning democracy’ to prevent creeping socialism. However, it was actually the Liberals (wanting to steal an electoral march on the Tories) who first plumped for abolition in their 1955 manifesto, followed by Labour in 1959. It was not until 1963 that Maudling abolished Schedule A, having been assured by the chairman of the Revenue (Johnstone) that the yield was falling rapidly, and could be made up in other ways. The shift by Labour can be explained by the success of the building society movement: in 1950 owner occupiers were about 28% of the electorate, and by 1959 they were over 40%; Labour needed a share of that vote to regain office.
The abolition of Schedule A was compounded by the introduction of Kaldor’s capital gains tax in 1965 which exempted the primary place of residence. Kaldor had not intended such an exemption, but Labour had squeaked into power in 1964 with a majority of 4. The exemption was approved in committee by the chief secretary, Diamond, who noted concerns by civil servants that a person retiring from London to the provinces would face a large CGT bill. Thus the fiscal deterrent to house price speculation was removed.
What remained was how to finance the speculation. There had been an informal agreement between the big five retail banks to control credit. However, thanks to the rejuvenation of the City courtesy of the Eurocurrency markets, these credit controls were being circumvented by the new secondary banks, which were taking market share from the big five. The upshot was the Bank of England’s Competition & Credit Control policy of 1971, which decontrolled credit. The result was the UK’s first house price bubble in 1971-73, which ended in tears with the rapid rise in bank rate in 1973 and the collapse of the secondary lenders (leading to the lifeboat and much moral hazard). Credit was re-controlled in 1973 until 1980 (the ‘corset’).
The retention of the corset became impossible after the termination of exchange controls in 1979. However, the final piece in the jigsaw was the decision in 1980 (made by Lawson as financial secretary) to permit the banks to intrude upon the residential mortgage market. That market had hitherto been the monopoly of the building societies, who could only lend what they had in deposits, whilst the banks could (to some extent) create credit ex nihilo, giving them a massive advantage over the mutuals. Thus, ever since, prices have chased credit and credit has chased prices (absent the collapse of 1988-93 when sterling shadowed the DM and during the brief pause after the GFC). Every few years people pay twice as much for half the space; people’s ability to save for a precarious defined contribution retirement is compromised, and more than 80% of bank credit is directed to a non-productive asset class (instead of being invested in productive capacity). Above all, the wealth effect derived from owner occupation is spent on imported goods, deranging current account, and resulting in the alienation of UK assets and revenue streams to foreign interests.
Starmer’s Labour realise that with owner occupation now at about 60% of the electorate they will not regain or retain office unless they buy the loyalty of a large portion of the owner occupier class, who have an entrenched entitlement to ever rising capital gains (a function of ever decreasing welfare for the young and poor). Therefore, their entire policy is based upon the propitiation of the economic interests of that class, just as Blair did for ‘Worcester man/woman’ in 1997. Owner occupiers’ entitlement to ever increasing capital gains is an article of faith; they believe themselves to have an almost proprietary and providential interest in such gains (most especially because the diversion of credit to housing starves industry of investment, lowering productivity and wages, and so making employed owner occupiers that much more anxious for untaxed and unearned capital gains by way of offset). Literally nothing else matters in British politics. Everything yields precedence to this sacred totem. All of the main parties are in the market for owner occupier votes, and the Tories would still have been in the running had Truss not lost the confidence of owner occupiers by inadvertently raising lending rates (thus slowing the accumulation of capital gains). The Tories are being punished for exactly the same reasons they were in 1997, and Labour are being rewarded for that reason – and that reason alone.
Labour will therefore be incapable of solving the fundamental problems of the British economy which are structural, and have their roots in the fiscal preference to owner occupation created in 1963-65. Diverting credit from housing to industry would cause the bubble to deflate, impairing the banks’ main collateral (house prices), so the UK will continue on its rakes’ progress whomever is in power. Who, then, is the more corrupt: the politician who offers the bribe in the form of untaxed capital gains, or the owner occupier who believes him/herself entitled to the bribe? The UK’s national motto is not ‘honi soit qui mal y pense’, it is (as per the Boulting Bros.) ‘I’m alright, Jack’. I look forward to the failure of the Starmer/Reeves/Blair prospectus with a mixture of relish and apprehension.
This was a deep dive and I thank you for it.
A good summary.
A progressive wealth tax (see earlier post today) would be a way out. Abolish capital gains tax and set a wealth tax of 0% on the first million, 1% on second million, 2% on £2-£4m etc. Nearly every homeowner’s house and gains would be exempt but the principal of land taxation would be restored. A land value tax could then be introduced on the land value, leaving the building value within wealth taxation.
I share Michaelmas’s gratitude to you for this well-informed comment.
The only point where I would diverge significantly from you is in attributing the Tories’ problems to Truss alone. The fall or stagnation in real incomes over the last seventeen years, the appalling state of the NHS, schools, infrastructure, prisons, the perception that ‘nothing works any more’ and, for some, the realisation that Brexit was a con which caused more problems than it solved, along with the general sense that no one now has any convincing vision for the future, all, to my mind, damage the Tories’ standing in the eyes of voters.
I share your apprehension but not, I admit, your relish at the prospect of an unsuccessful Labour administration over the next few years. The situation is far worse than it was in 1997 and I fear that power-hungry actors both within and outside the UK see this as just another stage in shifting the UK towards an authoritarian right-wing state at the election after next, after which rank inequality will be entrenched on a long term basis. These are people who are in a position to think long term. Unfortunately, the welfare of the people of the UK is not their objective.
Yes you are right. The point I was trying (and perhaps failing) to make is that the Tories were electorally competitive right up to Kwarteng’s budget, despite the defenestration of Johnson amidst much scandal.
The Tories remained competitive up to that point because they were still delivering ample capital gains for their core vote of owner occupiers. However, by embarking upon a strategy intended to boost growth through expansion (in defiance of prevailing central bank doctrine, which was aimed at eliminating pandemic deficits via more subtle forms of financial repression) Truss raised the interest rate, which fed through to mortgage lenders, choking off credit and so dampening the post-pandemic trajectory of capital gains. This was an unforgivable offence for the Tory base. As a result Truss was out within hours. The Tories have yet to recover from that, but owner occupiers have only lent their votes to Starmer in the expectation that he will somehow deliver increasing unearned capital gains more effectively than the Tories. This, then, is a more or less precise repeat of the period between 1993 and 2007: then, the Tories lost the trust of owner occupiers because of their abortive ERM strategy (due to their misplaced belief that inflation was more important to the Tory base than rising capital gains); they were punished for this in 1997, 2001 and 2005. A sufficiently large section of the Tory base therefore lent their votes to Labour in implicit exchange for rapid capital gains; Labour did not disappoint them in this until the ruse was destroyed by the GFC, whereupon that vote switched promptly back to its natural home in the Tory party.
The UK has evolved since the 1950s such that its political economy can only be understood through the prism of capital gains derived from the primary place of residence. However, it is not alone in this: the electoral fortunes of governing parties in countries like Ireland and the US (both of which eliminated or reduced CGT on the primary place of residence in 1997) have arguably been closely tied to their ability to deliver capital gains to owner occupiers. I should add that it is not so much the liberalisation of credit or (as is so often touted) insufficient house building which is the key to capital gains as the fiscal preference – for credit will flow most freely to where it is least taxed. Thus, credit in Ireland and the US was liberalised before the creation of the fiscal preference (in 1985, 1988 and 1992 in Ireland, and in 1980 in the US). House price bubbles in both countries really got underway from 1997 (though had started tentatively in Ireland from 1995). Likewise, in the UK there were no house price bubbles prior to the liberalisation of credit in 1971-73 and from 1980; whilst the UK had established a fiscal preference to owner occupation in 1963-65, it was the liberalisation which enabled that speculation to be financed, but the subsequent bubbles would perhaps not have occurred had credit not found a relatively secure home in the domestic residential property market.
Also, as I see it, the way in which major political parties have purchased support through the housing and credit markets has helped offset the baleful effects of deindustrialisation, as surely as it has simultaneously amplified those effects. I believe that this process plays a large role – perhaps even the largest role – in the current geopolitical strategy of the Western powers. The US realises that if it can no longer preserve dollar hegemony then credit markets will crash, interests rates will soar, house prices will slump and there will be a massive domestic political reckoning. The UK cleaves to the US strategically because it has to free ride on dollar hegemony by having the City operate as an out-house of Wall Street; this lowers the interest rate the UK might otherwise have to pay, enabling credit to continue flowing freely into the housing market, and so keeping governments in office. Many thanks again.
Deindustrialisation was not a given in the UK, particularly after 1970 and the development of North Sea oil. We could have subsidised industrial production in a cheap energy economy.
Choosing a rentier economy has exacerbated deindustrialisation, not mitigated it, in aggregate. It has however insulated the Tory / New Labour vote. We have balanced the books on the backs of the poor, for whom shelter has become unaffordable and stable manual work unimaginable.
As for Truss, homeowners did not evict her from power. City grandees did that. The concerns of ordinary constituents do not move the 1922 Committee as fast as the concerns of donors….
What is killing the Tories is the Reform party. If I were not refusing to register to vote because I refuse to produce ID to vote, I would vote for the Reform party. Their manifesto is by no means unblemished but its heterodox policy combination is closest to my otherwise disenfranchised demands.
For example, Reform proposes to:
– cut taxes on labour
– cut taxes on small business, move them onto large internet business
– abolish Net Zero, strip renewable energy of subsidies and marginal pricing, nationalise energy companies
– abolish HS2 (I would borrow to complete the investment but it’s not a dealbreaker)
– reduce NHS waiting lists to zero by purchasing private capacity (I think this is a stop gap, minimal private capacity exists; any real expansion of capacity has to be long term within NHS by expanding doctor and nurse training, opening mothballed hospital wards etc. but I am not going to argue with more funding for healthcare)
– reduce net immigration to zero (dangerous target, could be accomplished by expulsion of liberals, Yorkshiremen, Jews etc as much as by border controls but they mean stopping economic migration, which is only a good thing for British workers, if not the Benthamite global utility maximising solution).
The aggregate vote share of Tory + Reform in constituencies I know is enough for a Tory general election win. By splitting the vote, Labour will come through the “centre”.
https://www.electoralcalculus.co.uk/homepage.html
Places that are unimaginable are showing as Labour wins – all of rural Devon, from the South Hams (think the Hamptons) to Torridge (think Maine) – but nobody *wants* Starmer. The liberals are left for dead everywhere. All of this is driven by Reform breaking the back of the Tories.
And what is fascinating is that the voters for Reform are doing this in cold blood. A vote for Reform is a vote for Labour this election – but it is also a vote for the real prize, what is the shape of the Tory party at the *next* election. Under first past the post Reform.can never win a seat but my reading of the party is that it is a takeover bid for non metropolitan wings of the Tories and Labour.
Reform is putting populist Red Tory meat on the table – and, interestingly, with zero mention of geopolitics and the need for war and rearmament. They can see that guns, not butter doesn’t sell. Whereas Starmer offers warmed over Blairism with a Zionist dressing and the Blue Labour and Muslim blocs are not buying it.
“Deindustrialisation was not a given in the UK…”
Real property price increases can limit available industrial investment funds:
https://fred.stlouisfed.org/graph/?g=HPQw
January 15, 2018
Real Residential Property Prices for United States and United Kingdom, 1980-2023
(Indexed to 1980)
Many thanks. You are right that deindustrialisation was not a given in 1970. Industry’s share of the labour market had peaked in 1961-62. However, the major staples had been in palpable secular decline since at least the early 1920s, and some (like shipbuilding) had collapsed even during the halcyon period of the 1950s. The ‘new’ industries of the 1930s (plastics, chemicals) and 1950s (nuclear, aeronautics) were struggling by the mid/late 1960s. Despite these pressures, the UK was still a very significant industrial power in the early 1970s, when the UK was running a modest current account surplus following the 1967 devaluation. Yet, as I see it, 1973 was decisive in increasing the UK’s cost base. It was not only a shift to a dear food policy and from the purchase tax (levied at a high rate on luxuries) to VAT (levied at 10% on a much wider range of goods & services) which were associated with accession, but the world food crisis and, above all, OPEC 1. All these developments fell upon the UK at the same time, and in the wake of Barber’s cheap money ‘dash for growth’, intended by Heath to evidence the vitality of the British economy to a sceptical Pompidou. The weak British governments of the time were also convinced that demand needed to be maintained in order to forestall a return to depression conditions. By 1974 the UK was suffering from rapid import penetration, and this greatly accelerated deindustrialisation. This supposedly proved Kaldor’s argument, articulated by the Cambridge Applied Economics team under Godley, and lately affirmed by the likes of Larry Neal.
The coup de grace, it seems to me, was the monetarist experiment, another disaster foretold by Kaldor, which actually began in 1976 with the IMF LOI. The elimination of exchange controls in 1979 and its coincidence with OPEC 2 led to inflationary inflows of hot money. The exchange rate surged as the UK suffered Dutch disease, and as the Howe Treasury increased bank rate in Volckeresque fashion (this has been covered best by Adrian Williamson). These two developments had the effect of slamming on the brakes and the accelerator at the same time. Industry’s cost base surged whilst its ability to export collapsed. Ministers seemed unaware of the contradiction until it was too late.
I should add that the preference to Finance had begun with the restoration of the FX market in 1951 (see Ranald Michie’s history, just published by OUP) and was advanced by the determination of Cobbold (and Bolton) to take advantage of Regulation Q through the development of the Eurocurrency markets from 1955. As Aled Davies has argued, the accumulation of Eurocurrency capital in the City overwhelmed British social democracy. The prediction Charles Addis made to Churchill in 1925 – that industry was doomed and that the City would prevail – was fast coming true. By the time Callaghan replaced Benn with Varley at the department of industry in 1976, the chances of there being a strong industrial strategy had passed and officials were mostly resigned to what they perceived as the inevitable, with the UK remaining strong only in pharmaceuticals, aerospace, armaments and food processing.
Was it ever likely that the UK could have adopted a Norwegian approach to North Sea oil gas? Alistair Morton (who succeeded Kearton) said that Thatcher blew the royalties on the dole, thanks to her evisceration of industrial employment. For Alex Kemp and others the cession of wide powers and revenues to the oil majors was due to the unusual cost of extraction in very unpromising conditions. For Jonathan Kuiken it was due in part to a fatal dissipation in the early 1970s of hitherto close relations between the British state and the oil majors (see here for an excellent recent survey which goes beyond Kemp’s lengthy double decker review of the official papers: https://www.routledge.com/Oil-for-Britain-The-United-Kingdom-and-the-Remaking-of-the-International-Oil-Industry-1957-1988/Kuiken/p/book/9781032291147). I suspect that it was not plausible for the UK to have gone down the Norwegian route: there were simply too many pressures on policymakers, and the temptation to take the easy way was too overwhelming.
I have read that Reform has won in about one ward (in Havant), and that they have taken about a third of those erstwhile Tory voters who have bolted from the party, allowing other parties to edge ahead in a number of contests. I daresay that there will eventually be a reconciliation between Reform and the Tories (as in Canada in 2000-03), but its effect will probably be to drag the Tories to the right and keep them out of office for about two or three elections, even if Labour struggles in office (as it surely will). I agree that City ‘grandees’ may have played a large role in evicting Truss from power, but they were surely working in active if implicit lockstep with party managers terrified about the implications which elevated interest rates would have on house prices. For the entire political class the preservation of inflated house prices is the largely unspoken keystone in the arch of public policy; it is the sun around which policy revolves, and it is a third rail with which policymakers touch at their peril. As Adam Smith noted, ‘there is a great deal of ruin in a nation’. Many thanks again.
That’s a very full response! Thank you.
Do you have Addis’s quote? I was not aware if him and have tried to find it without success.
I agree the trends of deindustrialisation and of financialisation have been long-time present. But entry into the EU was particularly bad given the simultaneous adoption of dear food, adoption of regressive VAT, discovery of North Sea oil (Dutch disease), reduction in import tariffs, liberalisation of the capital account and derationing of credit. A perfect storm for inflation and imports and capital flight and property price increase.
Speaking as an ‘owner-occupier’ who has never voted Tory, and who would happily vote for a policy that saw the end of houses as capital gains engines and returned them simply to places to live, I can’t help feeling a little irritated at your sweeping generalisations. I am sure I am not unique.
Motives are almost always complex and mixed. While your theory might have broad explanatory power when looked at across the population as a whole, every constituency has particular factors just as every person has individual motives. You also have to take into account what is on offer, who we can vote for, and whether our vote will count. FPTP ensures that the majority of votes are wasted, and that any alternative approach to the economy is unlikely to gain traction. Anyone who manages to get near power (Corbyn springs to mind) and is perceived as a threat to the neoliberal consensus is systematically and ruthlessly destroyed.
The party system is a game in which the rules are rigged so that we have the appearance of choice while any real alternatives are carefully excluded. You can have radical ideas for social justice and economic and political reform, but all the entrenched control of the establishment from state institutions through the media and intelligentsia are directed against any meaningful change. Blaming the voter in this scenario is like blaming the pig for the existence of sausages.
Thank you, Nick, including for the shout out.
Starmer meets City representatives quarterly. At a Christmas reception last year, Starmer said, ” The City is the UK’s greatest asset and Labour would unashamedly champion the City.”
In advance of Starmer’s election, Blair is broadening his team as per https://www.institute.global/insights/news/nick-carter-and-patrick-vallance-join-tony-blair-institute-for-global-change.
Many of the Blair team are in their 30s, ex Treasury and Health civil servants, recruited in the past couple of years, likely to be appointed special advisers (aka spads) in Whitehall and often interested in political careers. It will be interesting how they get on with civil servants. One wonders what former UK officials Aurelien / David, Anonymous 2 and Harry make of that.
Blair has never got over his ejection by the Brown faction. His team are issued with red boxes like government ministers. As Blair leaves the London office for his Buckinghamshire country retreat, red boxes are left at his office door.
The office has just been refurbished in advance of Blair playing a major role in the Starmer government. It feels like sofa government is back. One wonders, to summon the ghost of Alan Clark, if Blair had to buy his own furniture and, if yes, if the furniture is Chesterfield.
Blair and Clinton work together. They share donors. The donors would prefer that Blair works in the shadows.
Blair used to operate investment funds and have these donors aboard. That became expensive and attracted attention, so the funds were wound up. The Blair family are now clients of JP Morgan.
JP Morgan is account bank for Palestine’s gas revenues from Gaza. Blair sits on the oversight board for that scam.
Blair needs to avoid provoking the Murdoch press, so is happy to be a back seat driver. Rupert Murdoch blames Blair for the break up of his marriage to Wendy Deng.
It’s also the turn of Blair’s children to make money off the British state, something that their sock puppet Starmer plans to facilitate. The eldest is friends with Sunak. Sunak’s also an investor in the eldest’s firm.
I am flattered Colonel, that you are interested in what I make of the current prospect. I can only say that I am deeply depressed by what is going on in the UK.
But thank you for your comment. I always read what you write with interest.
What an interesting analysis; all completely reasonable and helpful to understand.
I would have never guessed, almost unbelievable. If there were any justice or rule of law in the UK, Blair would be in prison, and Assange would be free, but of course not..
Looking at the major political figures in the UK, Sunak, Starmer, BoJo, Blair… the specialized word that comes to mind is kakistocracy, just like in the US. The British public don’t like these people, but they have no choice. Some democracy.
kak·i·sto·cra·cy
/kakəˈstäkrəsē/
noun: kakistocracy
government by the least suitable or competent citizens of a state.
“the danger is that this will reduce us to kakistocracy”
a state or society governed by its least suitable or competent citizens.
plural noun: kakistocracies
“the modern regime is at once a plutocracy and a kakistocracy
The US and UK have become so similar, the only differences are the NHS (while it lasts), regional accents, and pubs with Real Ale. If Britain loses those, it might as well join the US as the 51st state
Well Eric got there first , calling it Airstrip One, which given its current ‘puppy dog’ role in the Ukraine/Gaza/Taiwan situations , is an apt description.
I despair of the British public, they are exhibiting the tendencies of lemmings.
I am from a fairly privileged working class family of print workers since the 1930s depression. Well, actually, before that.
My Nan’s Dad was Foc on the Daily Mail during the General Strike. All that was destroyed under Thatcher at Warrington and the Times by Shah and Murdoch.
My Mum, a lovely but stupid heiress of this tradition voted for Johnson in his election against Corbyn. I will never let her forget it.
But, it shows how the English working class are confused and led. It’s not that hard for Blair and his mates.
I remember when Blair was elected to the Labour leadership in, when? 1992? 1990? (I am resisting Google). I had a vote as a Political Levy paying member of the NGA (the first union sequestrated under the 1981 Employment Act).
I can’t remember all the other candidates. Perhaps Michael Meacher? Definitely Bryan Gould (he got my vote). I can’t remember but certainly no real Lefties.
I knew even then that Blair was a total shit.
FoC? Father of the [Union] Chapel?
Yes, that’s right.
In the 80s, just five years after his election as an MP, I was told by the then Chair of the Darlington Conservative Party, adjacent to Blair’s Durham Sedgefield base, that Blair was one of them and a man he could both trust and support.
Thanks for this post. My question about the Blairs and the Clintons in the West, the first nominally left of center mainstream politicians to embrace and establish neoliberal economic-think as the ruling paradigm in national politics, my question about them is: Why are they so desperate to keep hold the reins of party power even into their 80’s instead of yielding to younger party members? Is it vanity, ego, greed, or the fear that the last 30 years of the neoliberal thought collective’s actions are wearing thin and only they can hold the line against the public’s rejection of all they have wrought? Fear the younger party members might start listening to their public and parties voters? I’ll never know.
They’re ring-wraiths.
Tony Blair, the Iron Lady’s most lasting gift to the world…
Starmer will be PM and Blair will be the power behind the PM, because Starmer and Blair serve the interests of the powerful.
What the people want doesn’t play into it, except when they happen to agree with the powerful.
When you think it can’t get any worse, Mr Finster’s cynicism shows you that it can. Or might. Or will.
By doing away with land taxation, the banks could lend more as land became more valuable, not encumbered with that charge.
The Irish were also suborned in 1977.
Banks, all the way down …
Tony Blair reanimated! Maybe when he is back, we will also get Zombie Hillary on this side of the pond.
Excellent post. Love the graphics to support the arguments. Blair and Clinton are twin brothers from different mothers, as the expression goes. Social liberals, fiscal conservatives who joined their parties to the FIRE plutarchy that developed from ~1985 – present. (The Drexel Era, as I call it). The greed of the two men is evidenced by their post-office buck-raking. Not sure what’s worse: the Clinton Global Initiative or Blair’s monstrous chimera of management consulting and influence peddling. I mean, the man shilled for Kazakstan. He doesn’t need the money. Ergo, he’s another breadhead.