Thatcherism, austerity, Brexit, Liz Truss... goodbye and good riddance to all that

Illustration: Dominic McKenzie/The Observer

The Tory party in three weeks’ time promises to be in a more ruinous, even life-threatening position than Labour was in the aftermath of the 2019 general election. Labour at least had a route to recovery after an epic defeat – to blend mainstream and centre-left opinion around a pragmatic programme for government, to eliminate all traces of antisemitism and to marginalise its toxic extremists. The question was whether its leadership, membership and trade union backers would have the capacity and want power sufficiently to pull it off. They have.

Today’s Tories and their blindly ideological press – which has had such an important role in reducing the party to the political carrion on which Nigel Farage’s Reform now preys – has no such shared grasp of the task ahead. There is no longer a strong centre right existing as a coherent formation that could anchor such a recovery, or skilled politicians who might lead it. Instead, over this parliament the party has disintegrated into a babble of rightwing cults ranging from Trussite libertarians to “National Conservatives” stressing the traditional virtues of family, faith and national community. The response to the desperate condition in which millions now live and the wider crises of stagnant productivity and investment, intensified by Brexit, is to blame immigration, working-class fecklessness and high taxes – even if those are moderate by European standards.

Farage’s malevolent talent has been to aggregate this ragbag of prejudice and saloon bar one-liners into a simulacrum of a political party, which last week in one poll topped the Tories – the “crossover” point. How the party should react – to join forces with Reform or take them on – will dominate the Tory conversation during the campaign, as yet more candidates dissociate themselves from the Tory brand. The chances of even holding on to 150 seats will shrink. The Tories could be out of power for at least a decade – perhaps longer. Even the party’s survival is not guaranteed.

The Tories could be out of power for at least a decade – perhaps longer. Even the party’s survival is not guaranteed

Yet so dominant are its rightwing factions that they crowd out any candid assessment of how their party has come to be so despised and has fallen so low. In truth, the root of their ills, if they thought hard enough, is the near religious veneration of Margaret Thatcher – shared by Farage – lionised as the true Conservative who put the country on the road to recovery on the principles of small state, low taxes, self-organising market, suspicion of foreigners (especially Europeans) and individualism. Those may have been her principles, but what almost no one on the right dare ask themselves is that if she was the author of such a majestic recovery, why is so little of it in evidence today?

The answer is not bad faith or lapses into “socialism” – a crime that Rishi Sunak, faithful Thatcherite, Brexiter and tax-cutter, is ludicrously said to have committed. The unpalatable truth is that individualism in self-organising markets and rollback of the state do not work as the path to prosperity even in theory, and prove impossible in practice. Instead, successive attempts to implement the doctrine since 1979 have been the direct cause of great catastrophes culminating in the one that has passed into legend – the Truss budget. It is Thatcherism that has laid the country low, and that the electorate is now repudiating. The liberal Tory “wets” she so despised were right; the postwar settlement needed reform not dismantling.

The first catastrophe was the monetarist experiment of the 1980s – a means to roll back the state so it would print less money – which achieved neither a smaller state nor lower inflation. Other countries may have fallen for the same snake oil, but none so emphatically as Britain. Our industrial base was needlessly decimated, with manufacturing employment close to halving in a decade. Nor was there any engagement with the stricken towns across the Midlands, north of England and Wales that were simply left to rot. North Sea oil revenues, instead of being harnessed in a Norway-style national wealth fund that today could have been worth more than a trillion pounds, were spent instead on sky-rocketing welfare benefits.

The second catastrophe, with the same ideological roots, was the commitment to financial deregulation in general and the big bang in particular – allowing the world’s investment banks both to lend and speculate in financial securities backed by the same capital. Again, Britain was the financial deregulation leader. Building societies, emblematic of the failed culture of working-class solidarity, were to be free to demutualise and banks to lend mortgages. Britain then experienced a 20-year credit and property boom so that by 2007 every £1 of capital supported an astonishing £50 of lending. Britain’s financial collapse and consequent depression were the most spectacular in the west.

David Cameron and George Osborne, Thatcher’s spawn, chose to describe the calamity as a result of New Labour’s excessive public spending

David Cameron and George Osborne, Thatcher’s spawn, chose to describe the calamity as a result of New Labour’s excessive public spending – perhaps the biggest economic misdiagnosis in our island history. Enter catastrophe three – austerity, another attempt to shrink the state to set the individual free. It failed completely, but in the process hit people in areas still reeling from the first catastrophe even harder. They voted in their millions for Brexit: nothing, they reasoned– as wealth continued to concentrate in London and the south-east and drain from the rest of the country – could be worse than the status quo. It could. Brexit, again meant to release imagined individual energies from the shackles of Brussels – became the fourth catastrophe. GDP and tax revenues have shrunk below trend levels, costing at least an estimated £120bn and £40bn respectively.

Then came Liz Truss, determined to step up the one true faith several gears as she unleashed catastrophe five. In focus groups, the legacy of her disastrous budget still cuts through like no other. It is a proxy for 45 years of ideological misgovernance, held partly at bay during the Blair years, but returning with a vengeance thereafter.

Few on the right – although both Osborne and William Hague have both got closest in their condemnation of the homemade Brexit and Truss debacles – confront this catalogue of catastrophe. It is why Sunak has no convincing story to tell in this general election. Farage may win some disaffected voters, but he remains, along with the discredited Boris Johnson, the author of the widely despised Brexit: it is delusional to imagine a politician who thrives on poisonous division could ever approach winning an election. The country wants change. It is not a one-party socialist state that beckons, as the Mail, a prime author of the right’s crisis, shrieked last week. Rather it is an alternative, investment-driven partnership between government, business, finance, unions and civil society to drive our economy and society forward. Goodbye to the calamitous mistakes of the last two generations.

• Will Hutton is an Observer columnist