Will Hutton: ‘As an act of crass stupidity, this has rarely been equalled’

Will Hutton, The Observer, Sunday 11 December 2011


The Tories are one of the world’s most enduring political parties. But this long life is built on its cultural attractiveness to parts of the English middle class, especially in the home counties, rather than on its political judgments, which have, over the centuries, been almost continuously wrong, especially in foreign policy.

It was wrong to resist revolutions in France and the US; wrong to go slow over abolishing the slave trade; wrong to champion the Corn Laws; wrong to embrace appeasement in the 1930s; wrong to contest the decolonisation of India. The British right’s instincts – jingoistic, imperialistic, anti-progressive and isolationist – have consistently led this country into calamities. Today, once again, the Conservative right, indulging its atavistic instincts and egged on by a no less atavistic right-of-centre press, is landing the country in the soup.

There might have been a case for David Cameron to veto the use of the EU treaties for the eurozone bailout if Britain’s national interests had really been threatened. But they were not. Much of British finance in whose name Cameron exercised his veto – routine banking, insurance and accounting – was wholly unaffected by any treaty change. The financial services industry in Britain constitutes 7.5% of GDP and employs a million people; the City represents perhaps a third of that and, in turn, that part threatened – if it was threatened at all – some fraction of that. This is a tiny economic interest. If the coalition is serious about rebalancing the British economy, it is preposterous to place a fragment of the City at the forefront of our national priorities.

Moreover, any tax, such as the financial transaction tax about which Cameron was so exercised (and which is, in any case, a good idea if done right as recommended by the IMF), has to be agreed by all. Which means that the threat was nil. Even regulatory proposals, although proceeding by qualified majority voting, have in financial services proceeded, in reality, by unanimity.

There was no threat that could not have been resisted if Britain really was committed to defending the casino dimension of the City. Our entire relationship with the member states of the EU, along with our capacity to shape policies that may influence a far higher share of our GDP, has been put at risk for nothing. At worst, a dozen foreign investment banks and a couple of dozen hedge funds, along with their bonuses, might have been affected. But now the capacity to defend them, even if we wanted to, has been thrown away. As an act of self-defeating, crass stupidity, this has rarely been equalled in British foreign policy.

Worse, we have made it significantly harder for the 17 members of the eurozone rapidly to put in place the cluster of policies needed to save the euro. Chancellor Merkel said the compromise was workable – to widespread German scepticism; the European Central Bank warmly welcomed the progress, but announced no new measures. If the euro breaks up because its members have to move clumsily and slowly outside the formal EU treaties and institutions because of Cameron’s veto, the resulting series of bank collapses and consequent depression will hurt Britain badly. What’s more, fellow Europeans will not forgive us for a generation. This is a catastrophic moment in British and European affairs.
David Cameron is the best and worst of upper-middle class, home counties England – decent enough but saturated with prejudices he has never cared to challenge. He understands his own party and its instincts, but beyond that his touch is uncertain and his capacity to empathise with others close to non-existent. Doubtless, he thought his demand for Britain to be exempted from any measure on financial services to be reasonable, but he completely underestimated how it would be understood by a eurozone member in an existential fight to defend their currency. His circle is the hedge fund managers who payroll his party, rightwing media executives and the demi-monde of Tory dining clubs, Notting Hill salons and country house weekends, all of whom he knew could be relied to cheer him for his alleged bulldog spirit and Thatcher-like courage in saying No to European “plots”.

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