That was the advice from political journalist of the year, Fraser Nelson, speaking at Newgate Communications latest ‘View from the Bridge’ panel event on the upcoming general election and its possible consequences. Along with leading economist, Andrew Sentance (Senior Economic Adviser to PwC and former Bank of England Monetary Policy Committee member) and leading political pollster Ben Page (Chief Executive of Ipsos MORI), the panel aimed to shed light on an increasingly complex and fragmented political landscape and its likely impact on UK businesses.
It is hard to recall a time when there was such a level of political uncertainty facing the UK. We are eight months away from one of the most unpredictable general elections in decades, we are potentially a few years away from a possible UK exit from the EU and – most pressingly – nine days away from an historic referendum that could change our country forever. Indeed, with the economic recovery now ‘firmly on track’, according to the CBI, it has been observed that the key risks facing British businesses are essentially political in nature, rather than economic.
So how did we get in this situation? As Andrew Sentance explained, the UK economy is now performing a lot better than previously expected. With the latest GDP figures showing growth of over 3 per cent, the UK is leading the G7 economies. We are in a far better position than other advanced economies, such as France and Italy, in what Andrew termed ‘supply side fundamentals’ (eg, flexible labour markets, proportionate regulation and ease of doing business). This should mean more positive economic news for the future. So why is the current Government not getting the credit? Why are the Conservatives not doing better in the polls?
Ben Page noted that, despite recent positive economic news, the current political landscape is characterised by a sense of disillusion from the public. There is an increasing gap between the views of many voters and a ‘metropolitan elite’ and the recent growth in the economy has not fed through to wages for the majority of the country. In his view, the last recession was not characterised by mass unemployment, but by widespread ‘in-work poverty’ and a rising anger over inequality. Immigration – always a political hot potato – has again become the number one issue among voters (recently overtaking the economy) as concerns rise about their wages being supressed by cheaper labour from abroad. All this disillusion has helped create a fragmenting political landscape, characterised by an ‘insurgent attitude’ against the ruling class, both north and south of the border – with the main beneficiaries being the SNP (and the supporters for Scottish independence) and the anti-EU, anti-immigration UKIP.
So what does this mean in terms of the outcome of next year’s election? Fraser Nelson asked us to look to the bookies, rather than pollsters, for the answer. He noted that the most likely outcomes, in terms of the odds, were a Labour Government or a Labour-Lib Dem coalition. He argued that people should not be fooled into thinking that the upcoming election is a beauty contest between David Cameron and Ed Miliband. If Miliband seems to lack charisma or obvious leadership capabilities, it does not necessarily matter. What matters are the fundamentals – and ever since the coalition was formed, the ‘left-of-centre’ element of the British electorate has been united behind Labour (with many voters making the switch from the Lib Dems from 2010 onwards) giving Miliband a very strong chance of forming the next government. Fraser argued that Miliband’s leadership can be defined by a clear brand of left-wing populism, reminiscent of Francois Hollande in France, characterised by repeated threats and attacks on businesses and industry, including energy companies, banks, and private landlords. British businesses, he noted, should take these threats seriously and undertake as much contingency planning as far as possible.
Faced with this electoral challenge, the Conservatives, he argued, have not helped themselves. Despite a good story to tell on the economy and jobs, they have failed to capitalise, remarking that “many governments struggle to know where they’ve gone wrong, but the Tories don’t know what they’re doing right”.
Fraser Nelson added a further comment, reflecting his own pessimism over the upcoming referendum and general election, “If they [the Conservatives] can’t defend the Union, then how can they defend their record in government?” It was a valid point.
This brings us on to the issue of the Scottish Referendum, an issue clearly of pressing importance for most of the audience at the event. With the recent polls showing that the two sides are as close as ever, what are the consequences of a yes vote for business and the markets? On GDP, inflation, Gilts and bonds? “Unthinkable complexity” was the answer from the panel. What will be the impact on UK politics? Will David Cameron resign? “Perhaps… but there is no obvious successor” said Fraser Nelson. Will the Conservatives stay in power for the long term, with on-going built-in majorities resulting from the departure of Scottish Labour MPs? Or will the parties split and a more ‘right-of-centre’ England turn to UKIP as their party of choice?”…
“There will never be a ‘Prime Minister Farage’” declared Ben Page, perhaps said with more certainty than any other statement made during the session.
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