Watching DUP play kingmakers of UK politics best done from behind couch

POLITICS is very odd. Last January, following the “cash for ash” scandal in the North, it seemed that Arlene Foster’s career was over. Today, she struts the UK political stage as the ultimate kingmaker.

For English people of all hues, including those blissfully disinterested inhabitants of the shires, the deal between the DUP and the Conservatives will glare light on the true nature of the strange creatures who inhabit the nether regions of their beloved kingdom.

For political viewers in Buckinghamshire, seeing the DUP up close for the first time will be like that moment when Jacques Cousteau discovers bizarre-looking crustaceans in the darkest corners of the ocean’s floor.

The Tories are to be propped up by a bunch of creationist, climate-changedenying evangelicals, who believe that marriage equality is the devil’s work and opening shops on a Sunday contravenes God’s word. Box office. If there ever was any residual support for Ulster Unionism on the “mainland”, it will evaporate like snow off a ditch as soon as these people are allowed on Newsnight!

In truth, the entire strategy of the DUP was never to be seen on “proper” BBC, paint all Catholics as fellow travellers, and quietly extort as much money as possible from Surrey to finance those crucial issues underpinning British identity such as who pays for Ballymena’s bin collection.

Now they move from county council to national stage.

If you doubt how much of a shock this will be to middle England, just look at the headline in yesterday’s online ‘Daily Telegraph’ – the Conservative handbook – which reads: “Who are the DUP? ”

Quite how it will all work out is anyone’s guess, but key to the durability of Westminster’s oddest shotgun wedding will be the UK’s economy – or, more precisely, England’s economy.

The reason it is all about England’s economy is because the English economy throws off the surplus that is then used to prop up the incomes of the supplicants in Scotland, Wales and Northern Ireland. That’s the deal.

Regular readers will know that this column is not half as worried about the English economy as many other commentators, believing it to be large enough, diversified and robust enough with some significant advantages. However, in economics, like in business, management matters. At this stage, it is not clear just how much bad management the English economy can endure from its politicians without stalling and suffering.

If the past 12 months have been dramatic for the English economy, the next 12 months could be traumatic.

Up to now, the UK economy has been doing quite well, not so much shrugging off Brexit, but embracing it. The mainstream view was that the UK economy would fall off a cliff after the Brexit vote as companies and punters wouldn’t wait for the actuality of Brexit to pull in their horns, but would act now to offset the possible problems ahead. In the event, the opposite happened.

Personal consumption and investment have both been going well, exports are also up due in large part to the fall in sterling.

This is what is supposed to happen. A weak sterling isn’t so much a reflection of a damaged economy but a reflection of the fact that currencies are supposed to adjust upwards and downwards to expectations about where the economy is going. In a country like the UK, the currency is both the essential economic ballast for the domestic economy and, crucially, the official opposition for the political economy.

So if we see policy changes, sterling reacts much quicker than any opposition countermove in the parliament.

Remember: the UK is the biggest destination for our agriculture. Agriculture is our biggest indigenous industry and 40pc of our total food exports are eaten in Britain, most of it in England.

In addition, the British are the biggest visitors to Ireland. Irish tourism is our second largest indigenous industry. We depend on the British having spare change in their pockets to spend on holidays. While some other tourists, such as the Americans for example, spend most of their time in Dublin or on the West coast, the English travel to every county in the country. This is largely because they have relations all over Ireland and tend to be more interested in going off the beaten track.

So what’s likely to happen over the next year across the water?

Income increases in the UK, largely based on wages, are likely to be modest. One of the reasons for this is that productivity in England – output per head – has been low for a very long time. So while unemployment is low, wages are not growing because the people in jobs are not very productive.

I’d imagine that the English will keep their levels of spending up by continuing to dip into their savings next year. This has been going on for about five years and pretty soon they’ll have no savings left. But that’s how they operate. People’s balance sheets are dependent on house price growth. In the past few months, house prices across England have fallen a bit. This is the first time since 2010. Any Brexit-related fall in immigration could exacerbate this.

England is like Ireland in the sense that it has a housing crisis, where people who don’t have houses can’t afford for prices to rise because they don’t have the personal income, but those with houses can’t afford for prices to fall because that’s what is propping up their personal wealth. So they will have a conundrum.

Company investment will depend on the Brexit negotiations, or at least the Brexit negotiations will constitute the background noise. No one is too sure what the election outcome has done to the chances of a hard or soft Brexit. Some believe that the DUP will work in favour of a softer Brexit, at least in Ireland, but don’t hold your breath. The election in Northern Ireland was nothing more than a sectarian headcount on both sides, implying that if a hard Brexit hurts Nationalists, the DUP might support it, irrespective of whether it damages the economic interests of DUP supporters.

As so many of these supporters are on some form of welfare from the English taxpayer and so few work in the capitalist system, a hard Brexit allied with more State handouts might be exactly what the DUP goes for. Eurosceptic Tories mightn’t even notice that small change.

All told, the up-to-now robust UK economy will have to muster all its resilience to get over this latest shock.

In the meantime, sit back and watch the Theresa and Arlene show through your fingers or from behind the couch.