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UK election: a poisoned chalice?

10th May 2015

UK election: a poisoned chalice?

By Michael Roberts
Taken from his blog: https://thenextrecession.wordpress.com/

May 8, 2015

As I write on Friday morning after the 2015 general election, the incumbent Conservative party is heading for an outright majority in the new parliament.  As I keep saying ad nauseam, this is what I predicted back in 2009 before the Tories (Conservatives) won the 2010 election and formed a coalition with the Liberal Democrats.  The main reason for the victory , I think, was as I pointed out in a recent post (https://thenextrecession.wordpress.com/2015/04/30/economic-well-being-and-the-uk-election/), that the economic recovery since the Great Recession has reached a peak in the last year, with UK real GDP growth picking up from near zero in 2012 to 2.5%-plus in 2014 and with real income per head finally turning up.

The exit poll immediately after the close of the vote last night turned up to be very accurate.  It predicted that the Conservatives would be the largest party by some way and there would be a meltdown of the Liberal Democrat vote, while the Scottish Nationalists (SNP) would wipe the floor with Labour in Scotland.  And so it turned out.  It now seems that the Conservative share of the vote in the UK election will be around 36% (the same as in 2010) and Labour’s share is just 31% (up from 29% in 2010). So the Conservative share is a little higher than the polls reckoned but Labour did much worse than forecast. Labour were wiped out in Scotland and it appears that the UKIP share was lower than forecast (with its leader, Nigel Farage failing to win a seat) and those votes went to the Conservatives. And the Liberal meltdown also helped the Conservatives.

UK election

The voter turnout seems to be about 65.7%, almost exactly the same as in 2010.  But as the turnout was much higher in Scotland, that means voter turnout in England and Wales fell compared to 2010.  Also, the share of the two major parties has fallen again, a little.  So the fragmentation of politics that we have seen across Europe continues.

But, in many ways, this victory for the Conservatives may turn out to be a poisoned chalice. They will have at best a small majority (as the Liberals are unlikely to join a new coalition).  The right-wing of the Conservatives (pressured by UKIP) will be baying for the promised referendum on leaving the EU.  This may take place within a year or so and not wait until 2017.  The City of London and big business is firmly opposed to leaving the EU and all the major parties will call for staying in.  The British public has shown in all polls that it is opposed to leaving.  So my third prediction (after forecasting a no vote on Scottish independence and on the Tories winning in 2015) remains that the British people will vote to stay in the EU.  By the way, there is no majority in Scotland for another independence vote (only 36% in favour according the latest poll).  No wonder, the SNP leader, Nicola Sturgeon, called the huge SNP victory in Scotland as a vote for ‘anti-austerity’, not independence.

Just as the Conservatives won because of an improving economy, the poison in the cup of victory is the economy over the next few years.  The government is still running a sizeable budget deficit which is not expected to disappear on the most optimistic forecasts of economic growth until 2019.  Public sector debt to GDP is still rising.  Even more worrying, private sector debt is still at record highs, with the property bubble.  Above all, business investment is very weak and corporate profitability is still below the levels of 15 years ago.  UK capitalism is running a large external deficit on trade and depends on an influx of finance capital (‘hot money’) to pay its way.  And a global recession is due probably right in the middle of this term of parliament.  Then the poison will have to be taken.  The Tories won’t win the next election.