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50p rate of income tax or reduce corporation tax, are either intentions rather than pledges (in the case of the former) or are not timetabled (in the case of the latter).
The same, but different? And this is why business shouldn’t worry too much about the result if it’s a straight win. The two big parties would like to pretend that their economic agendas are poles apart as it suits them to do so. (Ken Clarke’s recent warning that “Voters must not elect themselves into a financial crisis” is typical of this.) But it’s far from the case. In fact, for all the market jitters and the prophets of doom, in terms of the economy, the election result just doesn’t matter that much. Both parties subscribe to a pretty similar version of the neo-liberal economic orthodoxy (you can argue that this is what got us into the mess in the first place, but neither Labour nor the Tories are offering an alternative). Moreover, in the aftermath of the banking crisis there is little scope for anyone to pursue their own agenda. Whoever gets in will have to deal with a huge deficit and weak growth, rather than being able to spend in service of their political ends and reward their supporters.
Moreover, come 2011, for whoever wins, the real pain will start and there will be brutal cuts to be made. In more hyperbolic circles, it has been fashionable to compare Britain’s economic state with Ireland, Iceland and, more latterly, the PIGS (Portugal, Italy, Greece and Spain). This is overblown. But there is no doubt that whichever party inherits the economy will have to make a lot of decisions that will be popular with no-one at all. Writing in the Independent, recently, Dominic Lawson went as far as to suggest that this election could be a very good one for the Conservatives to lose, so thankless will the victor’s task be – better for them that Brown slashes public services (and damages dependent parts of the private sector) than Cameron, goes the thinking.
Come 2011, for whoever wins, the
real pain will start and
there will be brutal cuts to be made
Hanging by a thread? The events of the last few weeks have opened up another more interesting possibility though – and that is of a hung parliament with neither the Conservatives nor Labour having an overall majority. One very interesting scenario that could happen in these circumstances is Labour hanging on to power, but requiring the support of the Lib Dems – and the Lib Dems demanding they install Vince Cable as Chancellor as the price for their votes. Unlike Alistair Darling and George Osbourne, Cable enjoys significant popular support – and has a great deal of credibility, having been the only high-profile UK politician who actually got the banking crisis right.
Would life be hugely different with Cable installed in No. 11? Some think so. Writing in the Financial Times, Willem Buiter, Chief Economist of Citigroup, said: “Without a hung parliament, it is all but certain that the next government will impose early spending cuts and tax increases of sufficient size to calm the markets.” But he added, “All bets are off, however, should there be a hung parliament.”
But are they really? Would a beefed-up Lib Dem influence really make that much of a difference? Again, the answer is that while the details may change a bit, probably not. Indeed, with its bemoaning of red tape and taxes, the beginning of the Lib Dem’s business position on their website could easily be its Tory counterpart. So even Vince Cable would find himself using the same tools to achieve the same ends with the same very limited scope for movement. Indeed, whatever the election output, from a business point of view, there’s unlikely to be much difference. And from a government point of view, it’s unlikely to be much fun.
Rhymer Rigby is a regular contributor to the Financial Times.
SPRING 2010
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