Tories must admit the lies of Brexit to save the economy – and themselves

The new prime minister will have to be brave, but there is a chance to change course and abandon this extreme “Thatcherism”.

By Guy Hands

We will have a new prime minister very soon, but despite the drastic events of the past two weeks this appointment is likely to prove little more than cosmetic.

The extreme form of “Thatcherism” espoused by the Institute of Economic Affairs, among others – a low-benefit, low-tax economy – is a political philosophy that has been around since the early 1970s. Its believers were convinced it could be introduced once Brexit was complete and Britain had removed itself from the rules of the European single market.

Many at the top of the Conservative Party realise that the only way for Britain to compete on the world stage outside of the EU is by becoming the “European Singapore”. Since Thatcher, large sections within the Conservatives have dreamt of a low- or no-benefits economy where the resulting social unrest is controlled by ever more repressive means, with ever harsher policing and ever tougher sentences. However, the power of democracy dictates that the path to their perceived utopia is never going to be open in a Britain where the majority of voters are either economically left-wing or right-wing paternalists, and only a very small minority support the libertarian right.

On the face of it, all the Conservative Party can do, having been unable to enforce on Britain extreme Thatcherism, is to try to make the best of a ghastly job and get the books to balance in order to bring interest costs and inflation down before the next election. Hence its plan to save as many seats as it can, particularly in the south-east, to avoid total annihilation: in short, the presumption in the Conservative Party is that, post-Truss, it has no choice but to balance the books by raising taxes substantially and minimising welfare spending.

The appointment, and then sacking, of Kwasi Kwarteng as chancellor by Liz Truss was not only one of the most gutless political acts committed by any prime minister during British democracy, it was also inevitable that it would end in her resignation. Truss’s decision to appoint as Kwarteng’s successor Jeremy Hunt, who has done a U-turn on what the Conservative government stood for a few weeks earlier, was effectively an admission that everything Truss had promoted and promised in her campaign to become prime minister had been abandoned. She should have resigned at the same time Kwarteng went; not only would it have been the honourable thing to do, it would also have saved the Conservative Party from being totally humiliated and Britain from becoming a political clown show internationally.

Prior to Brexit, I predicted it would turn Britain into the “sick man” of Europe within ten years. Britain would be as it was during the 1970s: a country torn apart by high taxes, social unrest, strikes, low productivity and poor social services. I also talked about power blackouts as Europe focused on using its power for itself, and the possible need for intervention from the International Monetary Fund as borrowing costs rocketed. I said Britain would be increasingly seen as an unreliable partner, and the idea that new trade deals with the rest of the world would make up for what we lost by leaving the EU was delusional. I predicted greater, not lower, immigration as we tried to replace skilled European workers with less skilled workers from Africa and Asia.

Sadly, this gloomy scenario is being played out in full. The big problem for the Conservative Party is that when conviction politicians make a big mistake, rather than own up to it they see everything that happens as proving they were right. Thus it was right to leave Europe as “now we are outside the EU, we can see how badly they are treating us and we clearly should never have been part of such a terrible organisation” – avoiding any recognition that divorce almost always tends to be bitter and lead to a breakdown of relations.

It is going to take a very brave Conservative leader to tell the truth to the electorate and admit that they were lied to and that Brexit was really about introducing a radical libertarian right-wing agenda, one which was only ever going to help the ultra-rich. Consequently, the Conservative Party is now stuck justifying the many lies of the Vote Leave campaign in 2016.

There is, however, a positive alternative to the disastrous direction that the Conservative Party has taken Britain and itself in over the last six years. Instead of trying to deal with its internal problems, this once-great party could instead focus on what Britain requires and get on with the job of government.

The first thing would be to admit that Brexit negotiations were a complete disaster. As the world has changed since 2016, the party has the perfect excuse to change direction and renegotiate a revised Brexit along the lines of Norway or Switzerland’s relationships with the EU. This renegotiation will need a prime minister with integrity and enormous diplomatic skills, but if it’s done quickly, before it is too late, it just might put the country on the path to recovery, and even a Conservative victory in the next election.

Guy Hands is the chairman and founder of the private equity firm Terra Firma Capital Partners