If you want to know what the Conservatives are up to, there’s no need to follow their conference this week. Just read this site’s interview last Friday with Kwasi Kwarteng.
“Isn’t what’s going on with this difficulty with the petrol fundamentally about the sort of economy we want? The road haulage people, like some of the fruit pickers, like some meat processors, basically want to go back to the old ways,” we asked.
“They want Government to issue hundreds of thousands of visas, and they’re trying to use public pressure to get you to change course.” “That’s absolutely right, and I’ve said this a number of times, certainly privately,” the Business Secretary replied.
Why Minsters hadn’t said it publicly is a bit of a mystery. They’ve been making up for it since. One is reported today as saying that business has become “drunk on cheap labour.”
Kwarteng was right to argue that Brexit, while fundamentally about politics, was substantially about economics too – and a shift from the New Labour model of high migration, low wages, financial services, an overvalued currency and pressure on housing and services.
There is an electoral mandate for lower immigration, and those who argue otherwise are onto a loser, just as they were during the EU referendum campaign.
Keir Starmer called it wrong then by seeking a second poll, thus spitting in the face of democracy, and has duly called it wrong again recently by urging 100,000 new HGV driver visas.
Boris Johnson wants Labour pressing for higher migration and, by implication, lower wages – so keeping him on the wrong side of those newly-gained Red Wall Conservative voters, plus millions of others. It was kind of the Labour leader to oblige him.
If all this sounds a bit too easy for the Government, that’s because it is. Lower immigration may be a necessary condition for higher wages, at least in this case, but it is not sufficient. If only economics were so easy.
For if a firm finds itself suddenly paying out higher wages because there are labour shortages, a number of consequences may follow. One is that it puts its prices up. So inflation comes. Or else the firm tightens its belt and takes lower profits.
Which may mean others tightening them too, because the firm sacks them. So unemployment rises along with the inflation. Some may actually welcome this shortage economy.
Chris Loder has made the point that slowly-moving supply chains would be bad for supermarkets and good for agriculture. “It will mean the farmer down the street will be able to sell their milk in the village shop like they did decades ago.”
But the Tory history of being on the side of producers rather than consumers is a chequered one: see the split over the Corn Laws, and the party’s Joe Chamberlain-led tangle with protection, and subsequent electoral trouble, during the early years of the twentieth century.
Furthermore, the shortages don’t last all that long, at least if the Government has its way. For they all agree that British workers should be upskilled in order to replace the foreign ones.
In which event, the same Ministers who are queueing up to applaud increasing wages will later decreasing lower ones, as new British labour eases those shortage-driven rises.
You will be thinking that if all this were the full story, having a higher wage economy would do no lasting good. So it can’t be. And you’re right. Again, if only life were so simple.
The magic formula that helps to deliver prosperity is higher wages married to higher productivity. Which is what T-levels and the National Skills Fund and more apprenticeships are meant to deliver.
But we have been here before. The current Covid-driven shortages are taking place in a very different setting to that of the tripartite corporate state of the 1970s. Nonetheless, there may be parallels.
Back then, the higher productivity didn’t come, and Britain became “the sick man of Europe”, a title once reserved for the crumbling Ottoman Empire, as that vicious spiral of higher inflation and unemployment twisted downwards.
“Poor productivity lies at the heart of the problem,” Nicholas Henderson, then the UK’s Ambassador to Paris, wrote in his famous final dispatch from Paris.
The revived “sense of national purpose” that he called for finally came in the form of Margaret Thatcher, and has presented itself in a new form by means of the Brexit decision.
Perhaps some Ministers hope that a bit of inflation will inflate away a bit of our debt, though Rishi Sunak didn’t give that impression yesterday, as he flaunted his pro-Leave history during his party conference speech.
Did he hope that his audience would recall that Liz Truss, now emerging as a potential future leadership rival, backed Remain? Whether so or not, he has other matters to ponder.
Such as the fact that a little bit of inflation can suddenly become a lot, as expectations of its persistence kick in. Then interest rates rise – with all the implications that this has for firms and mortgages.
The test for the Government is whether it can deliver that programme for improved skills. Our panel of activists doesn’t find the backdrop of a bigger state and higher taxes encouraging.
None of the three challenges that we identified during the Queen’s Speech have been met. That of social care is unresolved. So is another necessary condition of delivering skills, the industrial strategy, net zero or almost anything else: more local control.
Net Zero itself is a trade-off between the new technologies paying their way, which not all of them may do, and the Government’s timetable for achieving it. We suspect that when push comes to shove Ministers will relax the latter while proclaiming triumph.
The Prime Minister will take comfort from the persistence of the Conservative poll lead, Starmer’s failure to cut through to voters in an age of disengagement from politics, and the consequent buoyancy of this Tory conference.
Since the Chancellor crushed the backbench revolt over overseas aid, the Government has been asserting itself over rebels in the Commons.
Only ten backbenchers opposed the Health and Care Bill at Third Reading – or rather the new Health and Social Care levy that will follow the national insurance rises that fund Johnson’s plan.
But there will be a sting in the tail for the Prime Minister, at least if those productivity rises don’t come. Memories of rising prices, home repossessions and high unemployment are a generation old. Voters haven’t yet clocked how serious our problems may become.
If they do, they will take their revenge at the ballot box sooner or later. Until or unless that happens, Ministers should redouble their efforts to devolve power and to skill up.
And wrestle with the questions that follow. Such as how long skilling those new British workers will take, what role automation will play, and the puzzle of how HGV drivers moving goods from A to B can improve their productivity in doing so.