Why hacking row will cost UK dear

Allister Heath
UNFORTUNATELY for Britain, our establishment is now so deeply engulfed in the debilitating media-political phone hacking crisis that the country has become rudderless at the most dangerous time for the global economy since the collapse of Lehman Brothers. In times of global financial crises, proper, clear-headed leadership from the top is essential. That we are not getting any from a dangerously distracted government is the biggest story of them all.

The situation is getting worse, not better. The police are deeply rattled and have their eyes off the ball; journalists are obsessed with the implosion in their industry and are failing to devote enough attention to other matters; the same is true of much of the public; politicians are talking about nothing else; there is now loose speculation that the Prime Minister himself may be forced to step down or call a general election (as absurd as this may seem); the chancellor has been badly weakened by the fact that he was the biggest supporter of appointing the ex-News of the World editor Andy Coulson to be the PM’s director of communications. The situation is out-of-control; the forces that have been unleashed are so powerful and so unpredictable that nobody can possibly know where this will end. Yesterday’s grilling of the Murdochs was a strange anti-climax; but the spotlight is now increasingly turning on the government and its advisers (though Labour’s very close links to News International over the years are also becoming clearer).

The evidence so far is that the opinion polls have barely moved – the public hates and despises journalists more than ever, but that is the only real change. Healthy scepticism of the establishment is an excellent quality in a vigilant public – but extreme hatred and suspicion of everybody in a position of influence, power or authority is destructive in a liberal democracy.

The real sadness is that all other debate – and especially anything to do with the economy – has stopped in Britain, at almost the worst possible time. Let us hope that national security issues are being looked after properly, despite the turmoil at the Metropolitan Police, which is tasked with dealing with them. What is clearly not being looked after properly is Britain’s economic and geopolitical interests. The Eurozone is at a crossroads; the EU is undergoing an existential crisis that is set to shape politics and economics on the continent for decades to come. Astonishingly, yields on two-year Greek government bonds hit 39.02 per cent yesterday; a crisis is imminent unless there is a speedy resolution of some kind.

The British government ought to be doing all in its power to promote the UK’s economic interests, to protect this country from the fallout from the debt crisis and at least try to nudge the EU in a better direction. Most importantly of all, it ought to be using this crisis to make the case for a much looser relationship between the UK and the EU. The British public is deeply eurosceptic, yet this government is failing to capitalise on this to try and negotiate a better deal for the UK and disengage itself from swathes of job-killing, growth-destroying EU policies. It’s an unforgivable wasted opportunity to reposition Britain as a global, trading economy, freed from archaic and burdensome ties to failing post-1945 regional bureaucracies.

On top of blowing a once in a generation chance of shifting the UK’s relationship with Europe, George Osborne’s political problems mean that he is clearly not thinking enough about the economy. He has a dual role as Chancellor and senior political strategist for the government; yet it has clearly become impossible for him to do both jobs properly. The economy is going through a soft patch, the deficit remains high – yet I doubt that it is these vital issues, or the sovereign debt crisis, that are keeping Osborne awake at night, especially after the way he was knifed by Rebekah Brooks yesterday (she repeatedly highlighted his role in Coulson’s hiring). Osborne and his advisers ought to be working day and night on contingency plans in case the Eurozone collapses or the US defaults, not worrying about ex-tabloid journalists. We need a plan for supply-side led growth in the UK, not a plan to contain the damage to the government from phone-hacking.

Even more depressingly, if it were to become apparent that the government could actually fall – before any cuts to overall public spending have actually happened – the markets would panic. The only reason institutions are still willing to lend so much so cheaply to the UK government is that they broadly trust its austerity plans; if these were suddenly swept away, everything would change in an instant. These are truly dangerous times.

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