As UK chancellor in the mid-1990s, Kenneth Clarke coined a phrase that more or less withstood 20 years of battering in British political life. He closed the 1996 Budget with the words: “We should never forget that good economics is good politics.”
His motto was not always entirely true, even in his four years at the Treasury. Enjoying the “Ken and Eddie show” of monthly meetings on interest rates with Eddie George, then Bank of England governor, Mr Clarke refused to contemplate devolving responsibility for monetary policy to the central bank. Later, Labour governments favoured “light touch” regulation of the financial sector despite many warnings and George Osborne sought to prop up housing demand when everyone knew a lack of supply was the real problem.
Despite these lapses, politicians of all colours tried to pursue “good economics” or “what works” when in power. The mantra was sufficiently flexible to allow differences of approach and alternative views on the right distribution of the spoils of economic success. Importantly, it prevented most political flights of fancy. The BoE became independent, the UK did not join the euro, reasonable fiscal rules provided controls and guidance for the public finances and regulations were generally proportionate.
Then 2016 and the EU referendum changed everything. The stunning success of the Leave campaign, based on a heady mixture of blind optimism and naked deceit, has encouraged politicians to ditch mainstream economics to an extent not seen in a generation. The manifestos of both the Conservative and Labour parties display the politics of hope, of whim and of anecdote in the face of evidence.
Labour wants to raise almost £50bn a year from higher taxes with the vast majority coming from companies or richer people. It makes no proper allowance for evidence that both of these targets are rather good at avoiding higher taxes — either by reducing their taxable activity or by changing the…