There will be no winners in UK election
The result of this week’s UK election is far from certain. Outcomes ranging from a Conservative victory to a minority Labour-led government still seem possible. The one certainty is that the cheers from the winning side will be fleeting.
Those who supported the Conservatives because they promise to “get Brexit done” will soon feel the sting of disappointment. Signing the EU withdrawal agreement would start the Brexit transition period on January 31.
By February, it will be plain to see that the issue has not been put to rest: the UK starts tough negotiations over its longterm relationship with Brussels.
The clock will again be ticking and the trade-offs invidious. In 2020 the UK will face a choice between control of its fishing waters and the ability to export without much friction; between doing a bad deal by the end of the year or extending the process yet again to negotiate something better.
As Alan Winters from the UK Trade Policy Observatory noted, “You can’t help feeling that it is us, the British public, that is oven-ready, who are going to get ‘done’”.
Not long ago, it would have been unthinkable for the government to advocate a policy its own economists think would knock about half a percentage point off economic growth every year. Couched in the language of “unleashing Britain’s potential”, this is the reality of Prime Minister Boris Johnson’s offer to the electorate. Borrowing more for greater public investment, though sensible, is unlikely to paper over such cracks.
On the public finances, the Conservatives want to reverse cuts to education and the police while raising taxes gently. They hope the public will be content with real public service spending outside health to be 14% lower in 2023/2024 than in 2010. At the same time, a Conservative government will have to find the funds for Johnson’s promises of sufficient state support for social care to prevent people ever having to sell their own homes to fund it. It is not a credible prospectus.
The Labour campaign has been even more eccentric. Despite committing to reasonable fiscal rules, the leadership shows every intention of paying mere lip service to budgetary or economic constraints ever since. In the campaign, extra promises of public money have been piled on top of manifesto plans already pledging the fastest deliberate peacetime expansion of the state.
There is nothing wrong with an ambition that the UK should have a more European scale of public sector, but the speed with which Labour wants to transform Britain would undermine serious budgetary discipline. It is easy to raise public sector pay, increase social security or cut rail fares, for example. You can just write the cheque. Labour is promising much more, however, with a huge programme of increased capacity in public services, nationalisations and more than doubling public investment.
Labour assumes there is sufficient spare capacity in the UK economy and the flexibility to make the adjustment seamlessly.
That is just as unrealistic as the Conservatives betting on Brexit success. What would happen if taxing the corporate sector more than any other advanced economy encouraged the flight of capital? What if the assumed tax receipts from the rich and companies are a mirage? Would a Labour government accept limits on its ability to shovel money out of the door? There are no credible answers.
The Liberal Democrats or Scottish Nationalists might moderate the main parties in a hung parliament. Sadly, there is little sign they are interested in this role. A minority government would be a continuation of the past two years’ turmoil. After a dire campaign, this election is important for Britain’s future and likely to result in a miserable outcome for the victor. Britain should prepare to be disappointed.
/© The Financial Times 2019