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Can we survive a minority government?

For more than 200 years the UK has been used to two party government being the rule, with party splits and the emergence of Labour a hundred years ago (itself almost being a split from the Liberals) being the exception. The 2015 election will go down in the history books as the first after a fixed term parliament, the first after a Lib Dem/Tory coalition and just possibly as the beginning of a period of unprecedented political instability in a country which has been widely regarded as the most stable in Europe.

The prospects for next May are, if current polls are to be believed, that we have two large minority parties (possibly three if the Lib/Dems recover) and of both of these being single issue extreme nationalist groups.  A contingent of 40 Scottish Nationalists and 40 UKIP-pers,   where the former only want to be out of the UK and the latter out of Europe, is entirely possible. Parliament may have two major parties who have no majority and two minor parties who will not join a coalition. The nature of single issue parties is that they make everything unpredictable and that every action the minority government (whether Tory or Labour) tries to take needs to be the subject of fresh negotiation. 

Although no-one in their right mind would try to predict exactly how each of the two nationalist parties would vote, it is worth thinking about first how the chips might fall on some of the decisions facing the next government.

To illustrate just some of the horrors which may await us I try below to look at a list of important questions and guess in which direction each of the two nationalist parties might push, and what they might be persuaded to support. 

Immigration: In a free market we would be bringing in the top students, researchers and technologists. The UK is growing today on the back of talented immigrants who bring skills, growth and demographic improvement . Any controls which stop this happening hold back all sorts of developments and push them elsewhere. This, more than any other factor, threatens the future of Cambridge, as it does the UK generally. The Scottish Nationalists are all in favour of immigration (as long as it does not involve the English moving to Scotland presumably) but this is a major UKIP issue and also one where they can further their main  anti-EU agenda. Any government will find itself under pressure to agree stricter limits from UKIP MPs and Scots Nats will happily abstain unless promised a bribe.

Drugs policy: From PM downwards all those who have researched the problem know that the current policy fills the prisons, enriches criminals and encourages crime. Drug addicts need help, not punishment. Supply, regulate and control and take the violence off the streets. UKIP has a libertarian element to it which might mean a sensible (legalise and tax) policy suddenly becomes more viable; the Sottish Nationalists (particularly in their Glasgow heartland) might be expected to agree but probably the candidates they put forward in May will be socially conservative, possibly reactionary, and so expect a division on drugs deeper than in any other party. Progress on this front requires leadership and minority governments rarely provide this.

Tax:  We have a tax system which penalises success and rewards failure. It is inevitable that it should do so at the personal level as no civilised modern society will let those who, through ignorance or improvidence, fail to provide for themselves, starve or die through exposure. But by doing it at the corporate level by taxing profits to subsidise loss makers and uneconomic enterprises, the government destroys incentives and worse it leaves trading those who can compete only because of the subsidies and tax breaks they receive. Again UKIP’s libertarian wing will want to free up enterprise but the Scottish Nationalists are very likely (particularly as they almost certainly will be the government in the North) to want to keep Corporation Tax high and weighted against the best performers. Tax reform of any sort requires a decisive and determined chancellor and a parliament which will support him. We have been lucky to have Danny Alexander and George Osborne for four years but even they could not deliver an amalgamation of National Insurance and Income Tax, despite the fact they probably both want it.

Banks:  On the right hand the current government taxes them, fines them and asks them to have ridiculously high levels of capital. On the left hand it offers subsidies to lend to people it chooses, criticises them for failing to lend more and tries to get them to expand into geographically and economically unattractive areas. This attack on the fundamentals of the finance industry is wrong and popular in equal proportions. And all the Labour party promises is to do more of the same. It is impossible at the moment to envisage either of the minority parties standing up for a policy of helping our banks to prosper and expand, even though Edinburgh is the home to our biggest banks and UKIP claims to be economically liberal.

Industrial policy:  If the government left enterprise and business to the private sector the Cambridge effect would spread much further and faster. The government will never have an industrial policy which works, it is self-contradictory and wastefully employs far too many sensible useful people who could be doing real jobs. The existence of grants and free or subsidised financing diverts effort into seeking subsidies rather than profits to all our detriment. It is possible to see the minority parties both agreeing to abolish the Department for Work and Pensions, neither is really a creature of the vested interests who have to date managed to pressure the parasitic web of interference which stifles all businesses. But it will not be important enough to either for them to make it a condition of supporting any government proposals in another area.

Local government: We have too many tiers, too much detailed regulation of building, planning and development.  A Cambridge unitary authority which zoned areas for development and then left the developers free to do entirely what they wanted within those areas would enable better and more efficient use of land than the current confused and confusing detailed control structure. Both minority parties have a strong self interest in devolving more power to local authorities. We can expect unitary authorities in several parts of the county within three years of the election. This is a win-win for any government party and for the minority parties.

Infrastructure spending: This is real Pork Barrel stuff. When it comes to funding pet projects in their constituency all MPs become staunch supporters of local white elephants, actual or planned. But genuine improvements are generally too long term or their benefits too widespread to appeal to voters today. Major rail projects are probably safe but that is about where agreement runs out. We say goodbye to road pricing or any other substantial improvement for ten years. The short term will take priority over the long term and consistency of approach will disappear. 

Foreign Policy : This is the hardest area to predict but also the area where a dysfunctional and disempowered administration is really dangerous. We cannot tell what crises might arise, but the fact that there will be crises where a firm and rapid response is required is unarguable, as is the fact that a minority government could probably not give it. The sole UKIP policy would be anti-European Union, the sole Scots Nat policy anti-British Union so that if a decision on any other matter is required their first question will always be how can we turn this question in such a way as to advance our cause?

On almost all of these the minority parties’ influence will be doleful, delaying or potentially disastrous. Parliament may become an obstacle to government in a way seen rather more often in Italy and France over the last 100 years. This is not only a matter of impeding decision making or influencing decisions disproportionately. On the fiscal deficit it seems hard to see who will hold the government to account. Both major parties are committed to reducing the deficit if they form a government. All its plans to cut expenditure (whether the Tory or Labour party are in power) will remove a specific amount from a specific person. This person will always shout more loudly about his loss than most others. Minority parties are particularly prone to pursue irresponsible populist and short term positions and so any attempts to cut a specific program will be resisted. New taxes will always affect some tax payer enough to make them complain and again the minority parties will find it easy to oppose.

The prospects are horrible if we have large UKIP and Scots Nat contingents of MPs; so horrible that if it happens we may see a response unknown in peacetime, with the exception of 1930, which is a Grand Coalition with David Cameron sitting down with a Labour leader to hammer out an agreed five-year plan. If not immediately after the election then after a year or two when the two major parties begin to realise they have lots in common with each other  and that a wide gulf separates them from the nationalists. That certainly would make 2015 go down in the history books.

This article was published in the  Cambridge Business Magazine - January 2015 Issue 37

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