UKIP are making waves. Never mind that they ended up with fewer seats on May 3rd than independent candidates. Never mind that they raised less than 10% of what the Liberal Democrats did over the first quarter of 2013. Never mind that they have already lost a councillor in Gloucestershire after just 12 days in office. In a climate like this, that is all so much chaff in the wind compared to the effect that this party is having on larger, beefier and much more venerable rivals.

Frankly, everyone else seems to be completely baffled by UKIP. Today we saw the Vice-President of Services at Edinburgh University Students Association attack Mr Farage’s party for a “well documented history of racism”, as dozens of other protestors chanted at Mr Farage, driving him to seek refuge in a pub. Driving Mr Farage into what approximates to his natural political habitat on the receiving end of angry abuse doesn’t strike me as an especially useful, or indeed ultimately successful tactic. Mr Crema is a member of the Labour Party - and perhaps his reaction to Mr Farage’s visit to Edinburgh to some extent symbolises the bafflement in Labour quarters as UKIP merrily sucks up white working class votes from them in places like Essex and Eastleigh. But this plaintive daze is nothing compared to the reaction on the other side of the Commons.

Pure, unadulterated panic would seem to be an understatement some mornings when one turns on the radio or the TV and hears the Tory party gnashing at itself with the frantic energy of a rabid dog. Former and current ministers have lunged into the fray over Britain’s membership of the European Union, backbenchers have revolted en mass over the EU and one very particular Conservative MP has floated the idea of joint Conservative-UKIP tickets in 2015; to say nothing of another Tory MP of particular style, who wants to see a party with no MPs become the coalition partner of the Conservatives, rather than a party with 57. All in all, this seems a frankly incredible response from a party that spent the majority of the 20th century in government, often for long periods.

The Conservatives know that a party in panic does not win office; that a party divided over an issue that voters persistently tell pollsters is nowhere near the top of their list of concerns is going to flounder. They know this from gruesome experience - between 1992 and 2003, the party was engaged in a seemingly interminable civil war on this very topic, costing them two complete shellackings at the ballot box in the process. This period also demonstrated that tilting rightwards doesn’t do you any favours either - the 1997, 2001 and 2005 Conservative manifestos were built around lower levels of tax, spending control and rolling back the state. The net result of all of this - a party still firmly locked out of the offices of power they had commanded with such apparent ease for the lion’s share of the previous century.

Yet all this has gone out of the window in a mad rush to respond to UKIP and Nigel Farage; a mad rush to win back control of a few councils and a few dozen council seats that it will take. If we take together this blind panic and Labour’s staid mumblings on the issue, then we have the picture of an establishment in shock and turmoil, trying to figure out why their voters are crossing another box. In the process of the panic, they seem to have abandoned all hope of finding other voters, or dealing with UKIP head on.

When Mr Farage’s windy rhetoric has blown away, all that is left is a load of fuzzy nonsense. On childcare, pensions, energy, housing, deficits, local government and the rest, the party’s policies either read like a wish list of the John Redwood campaign in 1995, or as slightly eccentric schemes dreamt up in one of Mr Farage’s lively and energetic visits to the pub. Difficult decisions are bottled, numbers fudged and big policy areas are left unfilled. There is plenty of ammunition to take on UKIP, but this is not going to be as quick as their rise; fighting back will take time and energy. It will take the slow burning heat of a general election campaign and all that brings - the saturation coverage, the angry voters and the endless blogging and tweeting - but when it comes, it will be miserable for UKIP.

Can a self-styled libertarian party truly advocate higher spending on defence, prisons and much else? What if closing QUANGOs to make the numbers add up means loosing the Crown Prosecution Service? Will people vote for a party that is unclear whether the EU rights it wants to shed include paid holiday and maternity leave? These are difficult questions to grapple with, and I expect UKIP to have a jolly good go - as is their style - but in the end, I suspect the result will be bitter for many of them. 

It is this long-term fight; to expose UKIP’s gaping policy holes and to pound the pavements and argue back against their breezy rhetoric; that will do for UKIP in the end. If they do not win an MP in 2015, I would contend, they will have had their moment in the sunshine. A party which has attracted so many people and candidates so quickly is going to have a bigger problem than just people imitating potted plants in the future; it is going to have a fascinating time moving beyond an antipathy to the EU and immigration and forging a wholistic party. Can libertarians and social conservatives really break bread in such a young and seemingly volatile party? If we keep up the fight long enough, we may not have to solve a problem like Nigel - his party may solve it for us. That certainly would be a way to go.

When Margaret Thatcher took office, the world spoke of the “British disease” - falling productivity, inefficient industries, industrial relations at rock bottom, a bailout from the International Monetary Fund, soaring interest rates on Britain’s debt, bodies unburied, the Empire collapsing and the rest. The country had just come through a decade which arguably saw some of the most brutal civil unrest here since the 1830’s, with some fearing that British democracy itself was in peril; Harold Wilson’s own views on this provide a good place to begin to explore that particular line. Mrs Thatcher oversaw a government that changed much of that - the Newsweek front cover from 1982 which announced “The Empire Strikes Back” wasn’t, I would argue, just empty media guff. The talk of the British disease ended; the image of Britain as forever in decline, forever fading away and stumbling towards the grave was brought to an abrupt end.

Mrs Thatcher’s own upbringing - stable, Methodist, middle-class England; the world of shopkeepers and aldermen - was so very ordinary. Yet her time in office was so very extraordinary. Andrew Marr asks us to not “[…]think of her as just another politician. Think of her as a one-woman revolution - a hurricane in human form.” Under Mrs Thatcher, new industries were brought in, others overhauled and others withered on the vine. Under Mrs Thatcher, millions saw their incomes soar and their tax bills plunge; homes and shares came into the hands. Millions of others saw incomes vanish, and tax cuts pass them by as their world came loose from its moorings and was smashed against the rocks in the mad rush of what was happening - a revolution. A dynamic surge of power through the entire country that laid low some and rose up others with terrific force. A complete uprooting of values and institutions that for so long had dominated our landscape, culturally, politically and economically. 

That is how she brought talk of the British disease to an end - with a revolution. No revolution goes off without casualties, and there were plenty to be found on the streets and picket lines of Britain in those years. But this revolution puts Mrs Thatcher into that rarest of categories - a truly, properly, transformational politician. Only Clement Attlee stands with her in the lexicon of post-war British Prime Ministers to have achieved anything like that. Unlike Attlee, this was her doing, not that of a group of people around her - Attlee, for all his wise governance and careful control of the cabinet, was one of a group of heavies. With Mrs Thatcher, there was Margaret and then there were the rest. There was the hurricane and then there were the rain clouds.

Perhaps it all stands out so sharply because of the deep ideological divide at the time - this was the time of Michael Foot’s Labour Party and the SDP/Liberal alliance. Perhaps it’s because she was so explicitly unfeminine and yet so very matriarchal at the same time. Perhaps it’s because there was a lack of challenging single figures who drew on the same raw energy that she did.  All these things add to the heady mix that swirls around whenever she is discussed. It’s worth also mentioning that the Britain that was created was so unlike the clean, Methodist, Victorian view she had of what she wanted this country to be. Not just the riots and the strikes; but the yuppies and the cocaine and the shoulder pads and the make up and the raves were all so very un-Margaret. It was so very unlike the world she was brought up in and the world she sought to build through doing what she brought her party and then her government - and, of course, a country that returned her to office 3 times and never voted her out again - around to doing. That tension is an interesting one, and one worth bearing in mind before one talks about her motives.

But the fact remains - there is a before Mrs Thatcher, and there is an after Mrs Thatcher. That revolution changed Britain forever, and all British politics now is about her and what her government did; be it cementing it, extending it, tweaking it, rolling it back or seeking to undo it entirely, we are all, like it or not, Mrs Thatcher’s children. Thus, she achieved something that so few others achieve in politics - a genuinely radical change to an entire country, from top to bottom, and a change that has lasted for over a generation. For that reason, that great towering reason, I would have to say Mrs Thatcher was a great Prime Minister. I may disagree with particular policies of hers, with her language, with her vision, with her ideology. But that does not in anyway detract from her greatness in that high office, and it is that that puts her on a par with Attlee - and also Asquith, Gladstone, Disraeli and a few others - at the very top of British political history. 

This morning’s truly awful manufacturing data from the Office for National Statistics (ONS) has driven home the point also made over the last few days by other data series from the ONS; the British economy is spluttering along at a miserable pace. The spat between the Office of Budget Responsibility and the Prime Minister over quite why this is the case has thrown light on a long list of various contributing factors. Among them is the government’s austerity programme - a programme I’ve previously been openly and highly supportive of - as well as various factors beyond the control of the government, such as the crisis in the Eurozone and high commodity prices.

As Vince Cable reminded us in the New Statesman last week, Keynes was a firm believer in bending with the winds of change. Dr Cable has made the case separately for higher capital spending, funded primarily through taxing universal benefits for pensioners and ending the ring-fence on funding for areas such as the NHS and international aid. The Economist, a newspaper I would count as squarely in the Liberal camp, has also now come out and argued for a change in tack, including borrowing worth 1% of GDP, to stimulate growth. Put bluntly, they are both right - it is time to change tack. The facts have changed and we must change with them.

That means we must push back against the ideas of those such as Dr Liam Fox, who wants to press the government’s austerity trajectory even further, using some of the cash to fund extravagant tax cuts. My suspicion is that Dr Fox’s agenda would simply inflate a massive bubble of cheap credit and hot money flows in the British economy, which would all come to a dismal end 3 years down the line, when his temporary measures expire. Britain would experience Ireland’s fate, but at high speed. Dr Fox also conflates austerity and the objective shared by many Liberals and Conservatives, of reducing the overmighty state - and in doing so, he plays ably into the hands of his opponents. His analysis, bluntly put, is woeful.

That leaves the Cable/Economist route - and it is one I think we need to endorse. The objective of a smaller state; a state that allows people to live, make mistakes and grow on their own without having to look over their shoulder at a distant central state; should be kept in mind, but using a difficult economic period as a means to enforce it will only create a backlash against it. More importantly, it is a long-term thing - something that will only happen over Parliaments, rather than months or years. It is about developing individuals and communities that choose to stand on their own, that move away from the state of their own accord and so enable it to unwind steadily. We can wait a little longer for a smaller state in absolute terms - percentage of GDP - though we need to move more quickly on a few key points, such as the Secret Courts issue, to demonstrate that it remains a point of interest for us all.

With that in mind, we need to focus on the here and now. The UK government is still enjoying historically low borrowing rates. But the austerity package is not the only thing driving those rates; last March, HSBC published a paper that bluntly argues the case for states having rigged financial markets to enable them to borrow cheaply, austerity or no. They termed this “financial repression”, and it includes policies such as Quantitative Easing (QE), which has seen central banks hoover hundreds of billions of pounds worth of government debt, thereby lowering the interest rate.

We have, in other words, a window through which to slip and make a change. We need to mix our policies carefully to make sure that the markets don’t start to press back against the repression and break through the limits we have set on them. So, along with the growth measures outlined below, we need to demonstrate that keeping the deficit under control is key. Therefore, the government should look to scrapping funding for alternative medicine on the NHS, withdrawing universal benefits from pensioners in the higher rate income tax bracket and introducing a land value tax - especially targeted at large banks of undeveloped land - to help the project to restore the national finances to health on track.

But, on the other hand, we should take the advice of Dr Cable, and the Economist, and even the CBI. Quite simply, we need to start building stuff - the government should develop capital markets for local councils to borrow on for capital funding to build houses and roads. We should double spending on high-speed broadband and we should also bring forwards projects such as the Northern Hub to deliver infrastructure as well as housing. Other bright ideas from these quarters - such as removing stamp duty on AIM shares; using the Business Bank as a Small Business Administration to bring together all small business help schemes in one place, with funding, to help them grow; changing bankruptcy rules to make it easier to make a fresh start; letting the Green Investment Bank start to borrow in the next financial year ; and so on - should also be brought into the mix.

And if this means shifting the borrowing targets again, so be it. We have the low interest rates brought to us by financial repression and we can signal to markets that we remain serious about dealing with the deficit through other measures. But we have run out of room to stay on this course; we need to declare plainly that we are focusing on growth and that we are prepared to put serious sums of cash into doing so. An uptick in borrowing up of to the Economists’ 1% of GDP - £14 billion - over one year should be allowed for in the figures. We might even use some of that money to refinance existing debt at the new lower rates, if we can, to shave more money from the deficit by reducing government interest payments. 

In short - the facts have changed. We need a new focus to deal with the crisis as it now is, not as it was in 2010. We need to remember that our focus here and now is to deal with the deficit and fix the economy, not to shrink the state in the short-term to stimulate a bubble. We need to own up to the slack we have already given ourselves on the fiscal trajectory and use the space gained by financial repression to kick-start existing projects for growth; as well as broadening the mix. I was wrong to stay this course as long as I have - I’ve had private doubts, but I should have said so sooner. Now, though, is a time for action - now is the time to change our minds.

There are principally two dimensions to any such event - the political and the economic. 

Politically, this is bad news for the Coalition, in particular the central leadership of the Coalition and especially among that small group, the Chancellor. Having used the AAA rating as a stick to beat the Opposition at every possible opportunity, the Chancellor now finds it snatched from his hands and gifted to the Opposition to use against him. For Ed Miliband, it must feel like Christmas - a chance to turn the whole economic narrative against the government, shifting the large section of public opinion that still blames the crisis on the past government towards blaming the Coalition.

But he must be mindful of the risks of singing the praises of Moody’s too loudly. Remember that this was one of the clutch of ratings agencies that, in the run up to the crash in 2007, was happily rating securities containing sub-prime mortgages as AAA. If you are building a strongly anti-financial sector narrative; Labour seem to be pressing hard to be tougher on the bankers than the Coalition; then singing the praises of institutions in the midst of that sector that seemed to have played such a major role in the crisis will only take you so far before it lands you in trouble.

Economically, of course, the question is whether the UK’s borrowing costs will increase at all. The experience of the US seems pretty clear - that borrowing costs barely changed after their downgrade by S&P, which came in the middle of far greater inaction by their central government. France’s fate is less clear, but I would contend that the UK looks far more like the US than France economically; far more competitive, far more flexible labour market and more. Either way, I do not think the Chancellor is going to have to make a meaningful allowance for higher debt payments as a result of this in the March budget.

How does the world work and what role should Britain play in it? These two important questions frame this question-and-reply post to Olly Neville. In the first part, I offer some questions to Mr Neville to try and help him frame a wider post on his whole world view. In the second, I pick out my vision of Britain, what this means for war and some disagreement with Mr Neville on its usefulness.

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Briefly - is it time to stop talking about the “welfare state” and give it a new name to reflect a new vision of its role and purpose?

This idea I owe to my office mate, who suggested that the problem with the name “welfare state” is that it suggests one can rely on the state for everything, at the cost of one’s own responsibilities and livelihood. Such a system breeds resentment among those who imagine themselves to be outside the purview of the system, whilst weakening the impulse to work and self-improvement among those inside it. In essence, it distorts incentives and narratives and creates an unhealthy vision of the state from both supporters and opponents.

Names are, after all, important things - they signify what we expect something to do as well as what it is. The Ministry of Defence’s name is a case in point; we expect the Armed Forces to defend us, though what they are defending, how they do it and why they do it are contestable things, we are generally opposed as a society to aggressive war for the sake of war. They can symbolise and even create cultures, I would contend.

To that end, my office mate suggested a new name for what we currently call the welfare state - the agency state. The meaning here is two-fold:

1. We, as taxpayers, view the state as our agent, discharging our social duties to our fellow man through the use of our taxes to provide services we cannot. 
2. The primary role of the state is to encourage agency in those who receive its help; to press people to take charge of their own lives and equip them to do as much.

Thoughts, comments and suggestions are very welcome!