Flip Chart Fairy Tales

I’m old enough to remember when the libertarian right in the Federation of Conservative Students (FCS) sang Tomorrow Belongs To Me. At the time it seemed all of a piece with the Hang Nelson Mandela posters and their other leftie-baiting antics. It’s only with the benefit of hindsight that we can see just how much tomorrow really did belong to them.

By the mid-1980s, the libertarians in the FCS had vanquished the other two factions, the moderates (or ‘Wets’) and the authoritarians, the traditional Powellite Monday Club right. Their combination of free-market economic policies and a degree of social liberalism was very much in tune with the zeitgeist. Despite some traditionalist authoritarian rhetoric, the  main emphasis of Conservative policies during the 1980s and 1990s was economic; deregulation, privatisation and weakening the unions. The period since has been characterised by what David Goodhart called the victory of the Two Liberalisms. George Osborne epitomises the post 1980s Tory; a fiscal conservative who cuts public spending and welfare but a social liberal who congratulates a colleague on her same-sex marriage.

The libertarians in the FCS re-defined what it meant to be a right-wing Tory. As a friend of mine put it at the time, “It’s no longer about hanging and flogging, it’s about cutting taxes, busting unions and privatising everything down to the street lights.” Their rivals on the right faded into the background. By the time the Monday Club was finally expelled from the Conservative Party in 2000 it been a busted flush for well over a decade.

Having beaten their right-wing rivals, shaped their party’s agenda and made a good start on redesigning the country in their own image you might have thought that the libertarian right would be happy. They weren’t, though. In the early 1990s I met a few of them on a warm summer evening in a pub in Westminster after some conference they’d been to. They were as frustrated as hell. Sure, John Major was continuing the privatisation policies and there was more trade union legislation in the pipeline but the revolution seemed to be running out of steam. Breaking up “the ultimate socialist bureaucracy”, the NHS, seemed as far away as ever. The British were wedded to it and nothing, it seemed, would change their minds. Furthermore, support for privatisation had been bought. Most of those who took advantage of the cheap shares still didn’t agree with it on principle. They still don’t. The root of the problem was that the British people still wouldn’t buy into the wider libertarian vision.

There was another problem too. Even as wages councils were being abolished, the railways privatised and council services put out to tender, the European Union was threatening to impose ‘socialism by the back door’ in the form of new labour regulations under the Maastricht Treaty. “It will take us right back to the 1970s,” they said. Many on the libertarian right had been opposed to the EU for some time but now their hatred reached a new level of vehemence.

Over time, the EU’s role as the regulation bogey-man seemed to grow. To an extent, the liberal-left colluded with the story. We saw these arguments played out during the EU referendum, with some on the left warning of a bonfire of workers rights in the event of a Leave vote and some on the right cheerfully predicting one. Clearly, the EU was the fount of all red-tape and leaving it would free the libertarian right up to finish the revolution which stalled in the 1990s.

But there was a flaw in this plan which seemed to get lost in the euphoria of the Brexit vote. It was the same one that was there in the early 1990s and it hasn’t gone away. British voters don’t share the free-marketers’ vision.

The important thing to understand about right-wing libertarianism is that it is a very eccentric viewpoint. It looks mainstream because it has a number of well-funded think-tanks pushing its agenda and its adherents are over-represented in politics and the media. The public, though, have never swallowed it. Countless think-tank papers, opinion pieces and editorials, telling us that shrinking the state is just common sense and that re-nationalisation is a loony left pipe-dream, have had remarkably little effect. The majority of people still want the railways and utilities taken back into public ownership and the proportion who want significant cuts to public spending has never even reached 10 percent. After three decades of haranguing by well-placed and well-funded small-staters, public opinion hasn’t budged.

Chart from British Social Attitudes 34, June 2017 

Over the last few decades, public opinion has swung between spending more and spending the same, support for the latter peaking during the period when David Cameron and George Osborne persuaded lots of voters that Labour has crashed the economy by borrowing too much. Yet even at this point, there was no support for cutting the size of the state. As Chris Dillow never tires of pointing out, Cameron and Osborne never really made a coherent case for state shrinkage. The Big Society came and went and the moment passed.

The BSA survey, showing that public opinion had swung back to higher spending, was greeted with dismay on the libertarian right. “The British people have forgotten the perils of big government,” said Kate Andrews of the Institute of Economic Affairs.

“Alas, the big state is coming back into fashion,” said City A.M.’s Christian May:

Depressingly, support for “reduce taxes and spend less” has never broken above 10 per cent since the survey’s inception in 1983. This, as they say, is the ball game. A large and growing percentage of the population now favours an increase in taxation and a hike in state spending.

Coming so soon after the Labour Party’s much better-than-expected performance in the election, it had some people very worried. “All that matters now is stopping Corbyn,” cried Andrew Lilico. And what if a radical socialist government, backed by propertyless millennials, were to start seizing property? The prospect is so terrifying that he would almost rather stay in the EU to keep some legal protection from the red menace.

It wasn’t supposed to be like this. The aftermath of the Brexit vote hasn’t turned out the way that those on the libertarian right, who largely organised and financed the Leave campaign, hoped.

Firstly, the right-wing populism they fuelled to win the vote has turned out to be more like that of their old Monday Club rivals; nationalist and statist. As the Economist’s Bagehot column said, after a long absence, the shadow of Enoch Powell is back. The result was the most interventionist Tory manifesto for a generation, aimed at winning and keeping those voters who care more about security and immigration than tax cuts and deregulation.

Secondly, the idea of turning out to vote in large numbers to upset the political establishment has caught on among the young. The libertarian right tried to claim the anti-establishment rebellion as its own. It would have been fine if it had been restricted to older and more conservative voters. But young and younger middle-aged voters decided to have a go too and they gave their votes to Jeremy Corbyn.

And, of course, were there to be a socialist government after the UK leaves the EU, it could tax, spend, nationalise and intervene in whatever it liked. It could even bring in a Brexit Retribution Act to seize the property of all the wealthy old men who persuaded us to leave the EU. That’s parliamentary sovereignty for you.

Lurid dystopian fantasies aside, though, the zeitgeist is definitely shifting back towards the big state. There is talk on all sides of easing up on spending cuts and the public sector pay cap. The initiatives on employment, led by Matthew Taylor and on productivity, led by Tony Danker, may be the beginnings of a greater role for the state in the workplace; a more interventionist policy than any seen since the 1980s. And that’s just the Conservatives.

So far from Brexit being the cue for the Thatcher revolution’s last phase, it may mark the end of it altogether. The period that Jeremy Gilbert dubbed the Long 90s, that were shaped so much my the libertarian right, may now be drawing to a close. It’s no wonder the small-staters are so exercised. They have now realised that tomorrow belongs to someone else.

Michael Barnier laid it on the line today. In a short but direct speech he emphasised that the UK leaving the EU will inevitably increase friction in trade:

Why do our Member States benefit from ‘frictionless’ trade in goods with other Member States?

•  Because they form part of the internal market. This has made it possible to harmonise rules and ensure their mutual recognition, guaranteeing that goods legally produced in one Member State can be sold in all the others without any other formal requirement.
• But also because, as members of the EU, they form part of our customs union, with a common external tariff and no customs controls at all between our countries.
• What would be the point of not having customs duties if, at the same time, divergent national rules prevented the free movement of goods?
• It is clear that only the combination of the customs union and the rules of the internal market allow this free, ‘frictionless’ trade between our States. One does not go without the other.

By choosing to leave the Union, you move to the other side of the external border that delineates not only the customs union but also the area in which the rules of the internal market are adopted and implemented.

Essentially, there is a balance to be struck between preferential trading agreements and political control. This applies to any trading agreement. Even membership of the World Trade Organisation requires submission to a supra-national arbitration panel in the event of a dispute. As George Magnus explained before the referendum:

There is a trade-off to be made, then. In light of this, you cannot have an abstract discussion about sovereignty without saying what you are going to surrender in terms of economic integration and benefit. Brexiteers are free to discuss “taking back control,” but they are then under an obligation to discuss the potential economic disadvantages of doing so.

Broadly speaking, the further away the UK moves from the EU’s orbit, the more political control it will have but the less preferential the trading conditions will be.

The Institute for Government has produced a handy chart mapping all the things the government says it wants against the various post-Brexit scenarios. Essentially, as you move from left to right, the ticks start to appear in the control bits, like immigration and escaping the jurisdiction of the ECJ but they disappear in the trade bits, like trade in services and the frictionless border.

Given the importance of immigration to the Leave vote, the Norway and Switzerland options must be off the table. Any post-Brexit agreement that doesn’t allow the UK government to control immigration from the EU runs counter to the spirit of the referendum result. Likewise, any arrangement that involves the UK continuing to pay into the EU budget. Frankly, if we remain in the single market and customs union, as some are suggesting, we might as well not bother to leave the EU.

The other stumbling block is the Northern Ireland border. As Mr Barnier says, the moment you move to the other side of the border there will have to be some kind of border control. The EU cannot have a customs border with a hole in it. If there are checks at airports, ports and the Channel Tunnel, the idea that you could still drive across the Irish border without any checks is plainly ridiculous.

Against this background, then, the value-for-money options on this chart would seem to be a customs union, similar to Turkey’s arrangement, or a Deep and Comprehensive Free Trade Area like that agreed with Ukraine. (In both cases, the detail would be different for the UK, given the size and shape of its economy and its previous relationships with the EU.)

The customs union option is making its way slowly up the political agenda. According to  the Guardian:

Officials and business leaders are anxious to puncture what they see as myths about a customs union that have deterred ministers from considering it as a much-needed economic option after Brexit.

While leaving the existing EU customs union is a direct consequence of Brexit, civil servants believe that agreeing a new customs union with the EU is not only possible but still compatible with key aims of Liam Fox’s Department for International Trade.

“There is a crucial difference between the [existing] customs union and a [future] customs union and [chancellor Philip] Hammond understands this now because the Treasury have taken him through it,” said one official familiar with the process.

A customs union with the EU does have some attractions. It removes us from freedom of movement obligations, the European Court of Justice and the requirement to pay into the EU. It would also allow the continuation of tariff-free trade in goods and would minimise the impact of border checks. It would also mean that we still have the benefit of all the EU’s free trade agreements, including the one just negotiated with Japan.

As Charles Grant explains:

Britain will have to leave the customs union of the EU, but could, like Turkey, create a customs union with the EU’s customs union. That would mean maintaining the common external tariff and accepting any changes made to it by the EU. Goods would then move easily across frontiers, as today, without the need for checks to see that tariffs had been paid, rules of origin respected or customs forms filled in. This would be hugely beneficial to firms that use just-in-time systems, notably those making cars and aircraft, and many retailers; to small businesses that have grown used to exporting to the EU without any paperwork; and to farmers who need to move food across frontiers speedily.

Britain should continue to benefit from the 50-odd FTAs that the EU has negotiated with other countries (though concerning the EU’s future FTAs, the UK would have to ask for special arrangements so that it was included; given the size of the UK economy, both the EU and the third country concerned would probably want to include the British). One major dividend of an EU-UK customs union would be to obviate the need to re-establish a hard border between Northern Ireland and the Republic of Ireland; without a customs union, it is hard to see how border controls of some sort can be avoided.

The downside is that the UK’s trade in goods would be determined by EU agreements. We would have to impose the EU’s common external tariff and would not be able to conclude any trade deals in goods with any other country.

But how much of a problem is that, really? How much of the talk of trade deals is just fantasy? According to Vince Cable, many of our supposed deal partners are bemused:

According to the FT, the Treasury isn’t convinced either:

Treasury officials have written an unpublished paper which challenges the DIT to prove it can line up free-trade agreements with non-EU countries that can outweigh the loss of European trade associated with leaving the customs union. Mr Hammond is likely to use the findings of that paper later this year to press home his case for staying close to the customs union.

Others have looked at this and their conclusions are pessimistic. NIESR’s study at the beginning of this year concluded that, even if we had trade deals with the Anglosphere (Australia, Canada, New Zealand, USA) and the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa) it still wouldn’t offset the loss of EU goods trade.

Even with a free trade agreement with the rest of the EU, NIESR calculates a loss of 20 percent of the UK’s goods trade. Without a trade deal that would be 32 percent. The gain on goods trade from other trade deals would total 6.2 percent. Even if NIESR is only half right, that is a lot of ground to make up. It will take a lot to compensate for geographical proximity and 25 years of integrated trade.  These trade deals, about which there has been so much puffed up chest beating, may not amount to much.

That said, a customs union is not a have cake and eat it option. It does nothing for our EU trade in services. There are a number of other downsides, not least of which, is that it would not enable the UK to open up its goods markets in return for access to trade in services. As John Springford says:

The benefits of trade deals are often exaggerated, and may not be enough to offset the cost of leaving the customs union. But the UK’s advantage in services – which now make up more than 40 per cent of total exports – means that services trade policy is unusually important, and Britain would lack the ability to open its goods markets in exchange for other countries opening their services markets. In short, without control of goods tariffs, the UK would have less negotiating power over services trade.

Nevertheless, none of the post Brexit options is without its negative points. A customs union at least gets around the immigration problem with what seems to be the least amount of disruption. Whatever we do, we will have to swap trade terms for political control. If we really must leave the EU, a customs union arrangement may prove to be the least painful way of getting an agreement most of us can live with.

Have we passed Peak Insecurity? The Resolution Foundation reckons we have. Britain’s labour market is at a tipping point, says director Torsten Bell.

[T]here is good reason to believe that the labour market shifts over the next decade will be different to the surprises we’ve seen over the past decade.

Hidden behind the noise of Brexit, the labour market is entering a new phase. In the second half of 2016 the number of workers on zero-hours contracts flatlined and agency worker numbers actually fell by 50,000. The most fashionable form of work in Britain, accounting for just shy of 100 per cent of employment growth this year, is good old-fashioned full-time, employee jobs. We appear to have passed peak insecurity.

As Torsten shows, the number of workers in what the OECD calls non-standard work, which means anyone not in a full-time employee job, has fallen recently. After steep rises since the recession, the numbers in self-employment, agency work, part-time employment and zero hours contracts have levelled off.

This, he says, is due to the tightening of the labour market. Rather than falling unemployment leading to pay rises, as happened in previous decades, the falling labour supply is encouraging employers to offer better employment terms and a better quality of work.

But is there more to insecurity than the type of employment contract people are working under? After all, full-time employees are still the majority of those in work. The proportion is slightly lower than it was during the decade leading up to the recession but we certainly haven’t seen the sort of shift towards non-standard work that features in some of the more hyperbolic commentary.

Source: ONS Employment Statistics, 14 June 2017

When the Resolution Foundation looked at this in 2015, they found that the proportion of people in insecure work had risen over the past decade from 30 to 32 percent while at the same time the proportion of workless people had fallen.

Which leaves me with a question. How much of the general sense of insecurity people are feeling is due to the lack of security in their job contracts and how much is due to something else going on in the workplace?

The RSA’s Jake Thorold has similar thoughts:

While the dial may be shifting back towards better security in a strict contractual sense, major transformations being wrought by technology, digitalisation and globalisation have also broadened what it means to be and feel insecure. As Anthony Painter has recently argued, ‘the experience of insecurity is subjective as well as objective. Insecurity is about your access to a sense of agency and resilience in your life.’ This applies no matter your employment type.

It’s little surprise that between 2005 and 2015 the number of routine and semi-routine workers reporting stress at work increased by a third. Many of these employees would be considered secure by conventional measures yet are anything but.

I think he and Anthony may be onto something here. Some aspects of this sense of insecurity are not captured in the employment data. You can feel insecure when in a full-time permanent job and there is evidence to suggest that a lot of people do.

As Anthony says, the British Social Attitudes Survey shows rising levels of stress and insecurity at work. Older workers and those in more routine occupations feel less secure and less in control of their work than their counterparts did ten years ago.

Charts via British Social Attitudes Survey

Andy Haldane’s speech in Bradford this week made headlines because of his comments about interest rates but what he said about stagnating wages is much more interesting.

He looked at the evolution of the Phillips curve, which shows the relationship between wage inflation and unemployment. In what we used to think of as normal times, if unemployment went up, wages fell. As demand for labour picked up, the reverse happened  because employers had to pay more to attract people from a shrinking pool of labour. Worker bargaining power increased as unemployment fell and reduced as it rose.

At least, that’s what used to happen. As Mr Haldane said, somewhat mischievously:

Is austerity really over? That depends what you mean by austerity, of course. Certainly the aggressive deficit reduction targets that George Osborne set and kept missing have been abandoned. As the Resolution Foundation’s Adam Corlett pointed out before the election, going by the OBR’s most recent forecasts, it is now unlikely that the deficit will be eliminated before the middle of the next decade.

This means that the cuts to public service spending will not be as severe as they were in the first half of this decade. As this next chart, from the Institute for Fiscal Studies shows, real terms public service spending is forecast to increase slightly during the next few years. However (and its surprising how often this gets missed in discussions about public spending) the population is forecast to rise so spending per person is still likely to fall.

Departmental expenditure limits since 2007–08Once you take out capital investment, there is a sharper fall in the amount left for day-to-day public service spending. The Office for Budget Responsibility expects it to fall by around 6 percent by 2022.

The trouble is, these shallow cuts will come on top of deeper ones made earlier in the decade. A report by the Institute for Government earlier this year warned that the ability of the public sector to maintain services while cutting budgets has “run out of steam”. Warning lights are flashing in the NHS, in schools and in local councils. Even this scaled back austerity might be enough to tip some public services over the edge.

And what of the other half of public spending, social security? This, too, is set to fall, as this IFS chart shows.

However, it might not fall by as much as the government thinks. Look at this chart closely and you will see that, in spite of the employment rate being at a record level and benefit entitlements having been reduced, working-age benefits are still slightly higher relative to national income than they were before the financial crisis. A combination of low wages and high housing costs means that, even though they are in paid employment, many people still rely on some form of state support.

This is unlikely to change much over the next few years. When George Osborne planned these benefit cuts, he assumed that the economy was set for a period of steady growth for the rest of the decade. That now looks very optimistic. Since the Brexit vote, the OBR has downgraded its growth forecast.

Inevitably, this will have an impact on earnings. The Resolution Foundation does not expect average pay to return to its pre recession level until the next decade.

Return of pay squeeze leaves average weekly earnings £16 below peak. Restoration of peak likely to be delayed well into next decade pic.twitter.com/g8yBYjZLR1

— ResolutionFoundation (@resfoundation) June 14, 2017

Furthermore, it forecasts that the combined effect of low pay, inflation, high housing costs and benefit cuts will lead to a significant fall in income for those in the lower half of the income distribution.

Until now, our tax and benefit system has been doing a reasonable job of levelling out the UK’s income inequality. If these cuts go through, all that will change.

Which is why I’m not convinced that they will. The question of cuts to tax credits was kicked down the road when there was a row about it in 2015. At the time I suggested that the distress caused by the cuts might be politically damaging and could even cause social unrest. Looking at the mood of the country at the moment, that looks even more likely now than it did a couple of years ago. The government backed off in 2015. Is a minority government, mired in Brexit negotiations and with a slowing economy, likely to show more resolve?

But if the government can’t cut the cost of benefits, it either has to borrow more, increase taxes or make even deeper cuts to public services. Perhaps that is why the chancellor has made gentle hints about tax rises. If they happen, it is unlikely that they will only hit ‘the rich’.

So, while  George Osborne’s aggressive deficit target has been abandoned, when it comes to people’s experience of public services and the tax and benefits system, austerity is far from over. Taxes may rise and benefits will almost certainly be cut. The public sector will find it ever more difficult to provide services to a rising population. Such is the brutal arithmetic of public spending. After the cuts of the last few years, even the relatively mild ones to come are going to hurt.

Are we at a pivotal moment in British politics? Is last Thursday’s electoral upset a sign that the assumptions of the last three decades no longer hold true?

For the last 30 years, what David Goodhart called “the two liberalisms” have prevailed, the economic liberalism of the right and the social liberalism of the left, “Margaret Thatcher tempered by Roy Jenkins.” The Conservatives concentrated on deregulation, union busting and privatisation, while talking tough, but avoiding any action on, on immigration, political correctness and traditional values. Meanwhile, Labour focused on a socially liberal agenda without attempting to roll back the economic gains of the right.

It was almost as though a tacit deal had been struck; you can have diversity, minority rights and discrimination laws if we can have privatisation, deregulation and tax cuts. The effect was to take policies that were popular with the public off the agenda on the grounds that they were publicly unacceptable. This applied both to left-wing and right-wing policies. Renationalisation and higher taxes on the rich were never going to happen but neither were the restoration of capital punishment or significant curbs on immigration. All were considered to be outside the Overton Window, the range of policies that politicians and media commentators said were politically acceptable.

Politics was all set to continue like this. As the Economist’s Bagehot column put it earlier this year:

Tony Blair converted Labour to Thatcherism and David Cameron converted the Tories to Jenkinsism.

While all this was going on, voters, and especially young voters, started to lose interest in elections. Turnout fell after 1992 and never really recovered.

Chart via Resolution Foundation

The ‘what’s the point’ arguments and the sense that anything that really mattered to people was off the agenda, contributed to the general sense of disempowerment. ‘They’ were all the same and anyway, big corporations controlled everything. While the economy was growing and people felt reasonably secure, they would put up with the parties they had long supported focusing on things they thought were irrelevant or to which they were mildly opposed. But when the economy collapsed, trust in political parties and corporations went with it.

The squeeze on pay and living standards fuelled a frustration with the business and political establishments that had been gathering pace for a while. Populism is usually depicted as right-wing but, while it focused most obviously against immigration, there was an anti-corporate element to it as well. Many of the people who voted for Brexit (and for Trump and Le Pen) didn’t like immigration and political correctness but they didn’t care much for corporations and free-market policies either. Theirs was a revolt against immigration but also against ‘rich banksters’ and the offshoring of jobs.

Brexit showed that, if enough people are for or against something, by voting, they can start or stop things from happening, regardless of what big business or any other powerful interests might say. Older voters discovered this first. The EU referendum saw a percentage turnout not seen since 1992. It brought people out who hadn’t voted for years. Turnout rose with age, according to some surveys reaching 80-90 percent among the over 65s. The pro-Brexit anger was partly economic and partly cultural. Older working class voters, who were concerned about immigration, played a large part in delivering the Leave majority.

This was the vote that the Conservatives believed they could pick up at the election. With its interventionist policies, the Erdington Modernisation was all about reaching out to those working class voters who had become disillusioned with the Labour Party. Much to the disgust of the Economist, the Tory manifesto was more statist than at any time since Edward Heath.

This strategy worked, up to a point. The Conservatives took seats from Labour in the Midlands and increased their share of the vote. As the FT’s Chris Giles and Gemma Tetlow noted, the higher the Leave vote in a constituency, the more the Conservative vote share increased.

It also increased in areas with a higher proportion of retired people.

The Conservatives also gained most from the collapse of UKIP. These are the factors which enabled the Tories to win seats like Mansfield and North East Derbyshire.

If that is all that had happened, things would have gone according to plan and the Conservatives would have been returned with a larger majority.

The problem for the Tories, though, was that not all the Labour voters who had defected to  UKIP went on to vote Conservative. Some went back to Labour. Furthermore, Remain voters under 45, many of whom would normally have supported the Conservatives, deserted them.

And, finally, young voters got the message about voting too. The referendum was a wake-up call. Campaigns over the last year to encourage them to vote seem to have worked. It’s too early to say for certain how high the young voter turnout was. It was almost certainly up on previous years, though the 72 percent figure being bandied around last week may well have been exaggerated. Nevertheless, there is evidence that those aged 18-25 helped to compensate Labour for the loss of its Leave-voting supporters. The party’s largest increases came from areas with a high proportion of young people.

This was enough to scupper the Conservatives’ chances of getting an overall majority. Although the party increased its share of the vote to its highest since 1987, the Labour Party increased its vote share too. The older working class voters stuck to the script but many of the youngsters, who were expected to stay at home, turned out for Labour, as did the younger middle-aged. The Erdington modernisation failed to gain Erdington where, although the Tory vote increased by 8 percent, the Labour vote went up by 12 percent. It was a similar story across most of England and Wales.

Like the Conservatives, Labour attracted new voters by pitching policies that had been off the table since the 1970s. Before the election, conventional wisdom said that Jeremy Corbyn was too left-wing but, as the campaign went on, it became clear that a lot of people liked the Labour Party’s ideas. Its interventionist policies, like taxing the rich, banning zero hours contracts and nationalising the railways and energy companies, went down well. Even those who weren’t especially fond of Mr Corbyn liked a lot liked a lot of what his party was saying.

It was a campaign the like of which we haven’t seen for decades. Representatives of business complained about their loss of influence, while the Economist lamented the abandonment of neoliberalism. The main parties put forward policies on immigration, price controls, industrial policy, tax and nationalisation which had been deemed unacceptable until recently. And they proved popular. People threw their votes at the Overton Window and smashed it.

Cultural theorist Jeremy Gilbert came up with the term “The Long 90s” to describe the period between the fall of the Berlin Wall and the Great Recession. He noticed, as Kurt Andersen pointed out in a Vanity Fair article in 2012, that the rapid changes in fashion and music that characterised the postwar period seem to have slowed or even stopped altogether after the 1990s. The 2000s and 2010s produced some talented musicians but their music wasn’t new.

This cultural stagnation, he says, reflects the political torpor we have experienced since the 1990s. But he thinks we may be coming to the end of that period.

He wrote that two years ago. The events of the last year suggest that, in the UK at least, he may be right. Suddenly things look very different. The assumptions of the Long 90s period, with its low election turnouts and limited role of the state, have been challenged. The former Labour voters who transferred their allegiance to Theresa May and the young voters who flocked to Jeremy Corbyn want more state, not less. They want the government to do something and they have discovered that voting can make a difference.

Even though it didn’t win the election, Labour is riding high. It is benefitting from the post-election opinion poll bounce that usually goes to the winning party. It is not inconceivable that Labour might come to power in 2022, or even sooner, with a radical and interventionist agenda. No longer constrained by EU regulations, a left-wing government could tax, nationalise, subsidise and regulate whatever it liked. The campaign for Brexit was, for the most part, led and financed by the libertarian free-market right; people who want more deregulation, less tax and a smaller state. It is beginning to dawn on some of them that Brexit may deliver the exact opposite. For Andrew Lilico, one of the relatively few economists to support Brexit, all that matters now is stopping Corbyn.

Everything else is secondary now to stopping him. Austerity, Brexit, public services reform, trade deals with the US, foibles about doing deals with Irish politicians or Lib Dems – even new anti-terror laws. Everything else is secondary and expendable for the moment.

It was their own fault. The Brexiters fanned the flames of populism and re-introduced people to the notion that voting might change things. They thought that the new post-Brexit Britain would be theirs. Now they realise it probably won’t.

When historians and political scientists look back, in a decade or so, one image will define the Summer of ’17. It won’t be a distraught Theresa May or a waving Jeremy Corbyn. It will be the burning Grenfell Tower. It is still way too early to be clear about what went wrong and whose fault it might have been but, regardless of the causes of the fire, as the Guido Fawkes blog complains, the political fallout is already damaging the Conservatives. It doesn’t really matter how much of a role austerity, a scrimping Tory council, outsourcing and deregulation had in making the catastrophic blaze more likely, the story fits the spirit of the times. Grenfell was a tower block housing the poor in the middle of one of the country’s richest constituencies, the one in which, less than a week earlier, Labour had overturned decades of solid Tory majorities. It may, in time, become a symbol of the point at which British politics turned.

Of course, this may all turn out to be summer hysteria. Maybe things will calm down in the autumn. In this business-as-usual world, the Conservatives will get a new leader and the free-marketers will reassert themselves to produce a less interventionist set of policies. They will win a solid majority and post-Brexit Britain will simply be a slightly poorer version of its early 21st century self. Labour will moderate its tone to win in 2022 and continue the process. Once the summer storms are over, the glaziers will repair the Overton Window and shut out the turbulent elements.

Somehow, though, I doubt it. It was always likely that Brexit, coming when the UK was still dealing with the aftershock of the financial crisis, was going to cause significant economic upheaval. Combine that with a renewed enthusiasm for voting and all sorts of things become possible. I still think we are in for some interesting times, Perhaps the Summer of ’17 really will be the end of the Long 90s.

One good thing to come out of the Brexit vote (though some of you might dispute this) is that I’m getting invited to do more panel discussions and round tables. At a couple I have been to recently, senior executives from the hospitality industry have remarked that they are not only concerned about a skills shortage, they are worried about an overall labour shortage. They believe there will simply not be enough people to fill all their jobs.

The assumption that the UK will only need skilled migration after Brexit runs through much of the media discussion. That the Labour Party had even considered the option of work visas for unskilled migrants was greeted with hysterical headlines last week. Suggesting that the country might need unskilled migrants is treated as heresy. But if the UK were to apply the same skills and earnings criteria to EU migrants as it does to non-EU migrants, around 75 percent of those currently here would not qualify. Even if, as is likely, many of them stay after Brexit, over time, restrictions on migration would almost certainly lead to a shortage of labour.

Consultancy firm Mercer published a report earlier this year in which they modelled the various migration scenarios and the likely impact on workforce numbers. They based workforce participation rates on OBR projections, assuming that participation would increase among older workers as the state pension age rises. They then came up with four scenarios from 2020, based on net migration falling to 185,000, 150,000, 90,000 and going negative. The scenarios are explained here:

The likely impact of all four scenarios is a working population growing more slowly than the total population.

I put these figures on a chart to show how far the workforce declines as a percentage of the population under each scenario. For clarity, I’ve kept as close to Mercer’s colour scheme used above as I could.

The underlying problem here is that the UK-born workforce appears to have stopped growing. The number of UK-born in work is barely a quarter of a million more than at its pre-recession peak but its rate of employment is at a record high.

Even though the UK born employment rate is higher than it has been since the ONS started counting, almost all of the post-recession employment growth is accounted for by those born elsewhere. This suggests that there isn’t much extra capacity among those born in the UK. Sure, the quality of some of the jobs could be better and those on short or uncertain hours would benefit from more secure work but even this would not increase the capacity of the workforce by much. Without immigrants, the percentage of our population in work is likely to go into a steady decline.

Mercer’s 100,000s scenario is particularly interesting because it is closest to the Conservatives’ stated migration target, which, as Theresa May said last week, they aim to achieve by 2022. According to Mercer’s projections, population and workforce profile would change significantly over the next 15 years or so. With fewer migrants arriving and a large cohort of the UK-born population moving into retirement, the workforce would fall to around 49 percent of the population.

It would be possible to increase workforce participation by encouraging more over-65s to stay in work, by helping some inactive groups back into work and by relocating some activity to areas of higher unemployment but the fact that employment rates are already at an all time high suggests that there isn’t that much spare capacity available. We’d need some more creative ideas than we’ve come up with so far to get participation rates higher still.

It is likely that many of the jobs created since the recession would not exist were it not for the availability of migrant labour. According to the most recent ONS statistics, there has been no increase in the number of UK-born in employment over the last year. All the net increase in employment has been due to those born abroad. It is likely, then, that many employers will struggle if their labour supply is choked off and some may well go out of business.

Some will, no doubt, argue that this is a good thing and the UK should never have allowed this number of migrants into the UK in the first place. That’s as may be but they were and our economy has come to depend on them. Reducing their numbers by more than half over five years is likely to be extremely disruptive. An executive from a large manufacturing firm told me that they are more worried about a shortage of skills and labour than they are about increased friction and cost in their supply chain after Brexit.

Perhaps the labour shortage will shock companies into investing more in technology and training or in moving to areas where there are more workers available. However this would require a radical change in the UK’s short-termist buy-not-build business culture that has prevailed over the last few decades. It would also not happen overnight.

British employers are in for a labour shortage shock to add to the trade and uncertainty shocks that will come with Brexit. Managing it will be a huge task and one which, from my anecdotal observations, a lot of businesses haven’t yet understood and prepared for.

All of which leads me into a plug for a CIPD event in a couple of weeks time. Mercer are publishing an update to their report later this month and its author, Gary Simmons, a former colleague of mine, will be presenting the results. It promises to be a thought-provoking discussion and one that is likely to be of interest to many readers of this blog. It’s free to all CIPD members. There is a token charge for non members but it’s not much more than the price of a pint.

The event is at 6.30pm on 19 June, in the week of the Brexit vote anniversary, at the Lyric in Hammersmith. To book, follow the link below.