We are a very long way off from seeing a live re-enactment of the 1970s being played out on the national political stage.
Yes, inflation has leapt from 1.7 to 2.3 per cent, presenting yet another headache for Treasury ministers. And the fact that this unwelcome news comes hard on the heels of the revelation that the economy grew by a lethargic 0.1 per cent in the first three months of the new regime’s Year Zero suggests all that doom and gloom of which we were warned might have been justified after all.
But readers old enough to recall the misery of the ’70s, with its three-day week, uncollected rubbish, miserable weather and regular appearances by The Dooleys on Top of the Pops will not be convinced by comparisons of then with now. Sure, things are bad today, but we’re not at the stage where we have to go cap in hand to the IMF to pay for our daily spending, are we? Are we…?
No, definitely not. Probably.
Still, the spectre of stagflation has never been entirely exorcised from the national psyche. A disastrous combination of high inflation, high unemployment and low economic growth five decades ago saw off more than one Prime Minister and president. Those complacent enough to dismiss the prospect of its return point confidently to historic levels of unemployment since the 1980s and the downward trend in the official figures since then.
But the unprecedented number of people who are “economically inactive” rather than officially seeking a job has remained worryingly high for 30 years. When Mrs Thatcher presided over unemployment levels of more than three million, Britain felt as if it were on the brink of social breakdown, with riots across the country, protest marches on the national news bulletins and songs by The Specials at Number one.
Today, with more than nine million – nine million! – Britons on some form of benefit and not seeking employment, the number of working age people dependent on the taxes of those still working has never been higher. In that context, we should be amazed at how healthy those growth figures look and surprised we’re not in a constant state of recession.
Inflation, meanwhile, is nowhere near the double-digit levels of the late seventies, early eighties or even late eighties (when it rose to more than ten per cent under the leadership of Thatcher and her reforming chancellor Nigel Lawson, with no Labour government to blame). But everything is relative, including inflation, and a 0.6 per cent jump in a single month suggests something fundamentally weak in Britain’s economic model.
All of this is happening in the context of a new government still finding its feet and experiencing the cold blast of public opinion on some of its unpopular flagship policies.
Not that the decision to remove the winter heating allowance from wealthier pensioners was ever intended to be a “flagship”, but so entrenched has ministers’ reaction to criticism of the move been that it seems now to be a point of principle that it is preserved, however little revenue the measure will raise and however detrimental the policy has been on Labour’s polling numbers.
But popularity is irrelevant when the government’s own figures suggest that 100,000 pensioners will officially move into poverty in a couple of years as a direct result of your policy. This is fundamental: a proud (and justified) boast of Labour politicians in the last few decades has been the enormous and unprecedented shift in the numbers of both children and pensioners out of poverty as a direct result, not of economic growth “lifting all boats” but of deliberate, targeted government policy.
To preside over a reversal of that achievement, on whatever scale, again as a result of deliberate, targeted government policy, threatens to destroy Labour’s credibility and past achievements on combatting poverty.
In the late 1970s and in the decade that followed, monetarist orthodoxy, as evangelised by Mrs Thatcher as leader of the opposition and then Prime Minister, decreed that the money supply had to be reduced in order to fight inflation. The ensuing contraction of the economy and devastating impact on public services forced a change in strategy of the Conservative government which ultimately benefited from a surge in economic growth and rising standards of living across the board.
The question now is whether the stage is set today for a similarly radical analysis by the same kind of political disruptor as Mrs Thatcher was. Does Kemi Badenoch fit that bill? It’s far too early to tell, and we should not forget that during almost the entirety of her leadership of the opposition, Mrs Thatcher was disliked and resented by a very large part of her own parliamentary party – right up until (and in fact beyond) the point at which she started winning elections.
It’s also far too early to write off the current administration; undoubtedly the immediate task of governing came as a shock to some newly-appointed ministers who must have thought the going would be far easier than they have found it. Many of those will fall by the wayside before this administration gets its act together. We are very near the start of a five-year parliament with no need whatever for Keir Starmer to go to the country earlier than it suits him; plenty of time, therefore, to correct mistakes and change direction.
But if bad judgement on domestic policy combines with more and consistently bad economic news, further constraining ministerial room for manoeuvre, opportunities will arise for an alternative narrative. For Labour, “stagflation” may be the least worrying spectre from the 1970s that could pay us a visit in the 2020s.