The age of volatility

16 December 2017

9:00 AM

16 December 2017

9:00 AM

Every year in British politics seems to be more surprising than the last. Few predicted in 2015 that the Conservatives would win a general election outright for the first time in 20-odd years. Fewer still realised that Theresa May would become the most popular Prime Minister since records began. And almost no one foresaw how the tide would turn against her so dramatically that the Tories would lose their majority, or that Jeremy Corbyn’s Labour would make such significant gains.

How to make sense of it all? Tory MPs are being offered an explanation by Gavin Barwell, the Prime Minister’s chief of staff, who has been seeing them in groups (starting with the cabinet) to talk them through the party’s post-election polling. Perhaps the most striking point in his presentation is that we are experiencing political volatility on a scale not seen since after the Great Depression or first world war.

One MP believes this is the effect of the Brexit realignment, which has seen Tories making gains among working-class voters and university graduates swinging to Labour. But Brexit can’t be the only explanation as there was almost as much electoral churn in 2015 as there was in June. The volatility caused Brexit, not vice versa. The 2016 referendum may have made politics harder to predict, but it doesn’t explain why everything is in flux.

Any explanation has to go back ten years to the crash. The electoral reaction was not immediate: indeed, as one Tory laments,   political volatility in 2010 was ‘annoyingly low’ and not enough to give David Cameron a majority. Labour created a new regulatory system that spectacularly failed its first test and led to the banks having to be bailed out with public money; had this happened under the Tories, voters would have veered left. The fact that this debacle occurred under a Labour government confused things. Voters couldn’t decide whether the crash was a market failure or a governmental one — an uncertainty that was reflected in the hung parliament of 2010-15.

The crash certainly focused minds within the Labour movement, changing perceptions of the Blair/ Brown project. The party (and its new members, especially) came to regret New Labour’s accommodation of big business and the banks, which is how someone like Corbyn, an irrelevance during the Blair years, managed to win the leadership in 2015. The crash, and particularly the recovery, also soured public opinion of big business; the banks in particular. The economy grew, but average wages did not. Compounding this sense of unfairness was that quantitative easing meant that those with assets got far richer while the rest struggled. So, when the Remain campaign asked business and the City to make the case against Brexit, it found the public determined to blow a raspberry in its face.

One senior figure on the Leave campaign has long privately admitted to me that the original mission was to get close enough to victory to stop further British integration into the European project. With about three weeks to go, he texted me urging me to turn on the television, saying: ‘This is why we’ll win.’ On screen George Osborne and Jamie Dimon, the chief executive of JPMorgan, were warning about job losses if Britain voted for Brexit. The Remain campaign was unwittingly giving voters the chance to kick a political and financial establishment they thought had failed them. At least one senior banker warned Cameron that enlisting the forces of finance in the cause was a mistake; bankers knew from their own research how unpopular they had become. These warnings were dismissed.

Stagnant wages are, perhaps, the principal reason why so many voters feel the system isn’t working for them. Forecasts by the Office for Budget Responsibility (the ones used by the Treasury) predict average earnings won’t recover to pre-crash levels before the mid-2020s. One lost decade is bad enough; the prospect of two helps explain why voters are in such a volatile mood.

Then we have the Amazon Prime effect: how out of kilter politics can seem with the pace of modern life. As consumers, voters can go online, order what they want and receive it within 24 hours. As electors, they must choose between parties that promise to deliver things in decades. Indeed, the potency of Corbyn’s populist pledge to abolish tuition fees came, in part, from how quickly it would come into effect. Vote Labour in June, he said, and a student starting their course in September wouldn’t have to pay for their degree.

Finally, there is the social-media effect. In the run-up to the last Budget, the No. 10 media operation was, understandably, focused on Philip Hammond’s big day. But the story with the most impact online turned out to be something few in Westminster had noticed: a vote on an amendment to the EU Withdrawal Bill that was spun, absurdly, as the Tories voting against animals having feelings. Two million people saw this erroneous story; more than 400,000 signed petitions about it. It was a further reminder that politicians, and particularly Tory ones, can’t even see, let alone understand, the battlefield on which they are now fighting.

What does this volatility mean, beyond the fact political commentators should be particularly wary about making predictions? Well, as one minister points out, it suggests that the last election returned a two-party result, rather than marking a return to the two-party system. Despite the fact that 8 June produced the highest combined Labour/Tory vote since 1970, a third force could yet emerge. Momentum didn’t exist three years ago and is now the most influential movement on the British left, while Vote Leave was a political pop-up. An architect of its referendum triumph believes Britain is not immune to a Macron-style shock: a new party with the right policies, could, he says, win the next General Election. Starting from scratch in terms of campaigning, reputation and organisation would actually be a net positive.

No matter how well (or badly) Brexit goes, there is no doubt it will change our politics. But just as the financial crash is still working its way through the system, it might take some time for the Brexit effect to become clear.

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