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Britain may turn into Europe's most politically unpredictable country

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For the past five years, Britain has been a haven of political and economic stability amid the turbulence in Europe. No longer.

In the years ahead, Britain will likely be Europe's most politically unpredictable country. This risk, first brought to the world's attention by the Scottish independence referendum in September, has been confirmed by the defeat suffered by Prime Minister David Cameron's Conservative Party in a special election on Thursday.

Yet the loss of Britain's safe-haven status is not yet factored into asset prices - especially sterling. The pound is still near its strongest since 2008 despite the country's current-account and budget deficits, the biggest in Europe relative to gross domestic product.

Although Britain faces an unpredictable general election on May 7, most investors and businesses are still behaving as if political uncertainty would have limited impact on economic conditions. This complacency seems misplaced, for three reasons:

First, Britain could become literally ungovernable after the election, with no single party or coalition of parties able to form a majority government. Current public opinion polls predict that neither the Conservatives nor the Labour Party will win enough seats to form a majority government - even in a coalition with Liberal Democrats.

Conservative-Liberal and Labour-Liberal majorities may both prove arithmetically impossible because of the rise of previously insignificant fringe parties. The Scottish Nationalists look able to boost their six seats in Parliament to anything between 20 and 50, largely at Labour's expense. The United Kingdom Independence Party is threatening dozens of Conservative incumbents. Meanwhile, the Liberals are almost certain to lose about half their 56-seat representation. As a result, a ruling coalition may have to include not just two parties but three or four, including fringe nationalist groups.

The Scottish National Party is sure to demand another Scottish independence referendum as its price for supporting a coalition, while the UK Independent Party will likely insist on Britain's withdrawal from the European Union. It is hard to imagine either Labour or Conservatives agreeing to such terms.

This means that a government may have to be formed without a majority in Parliament. While minority governments are quite common in continental Europe, the British Parliament has only once failed to produce a government majority - during a brief interlude in 1974 under Harold Wilson. It created seismic upheavals in Britain's adversarial politics.

The second reason for concern is that a multiparty coalition or minority government, even if it can be patched together in post-election haggling, will probably collapse within a year or two. Whether the next prime minister turns out to be Cameron or Labour's Ed Miliband, he will be seen as a short-term caretaker, passing only non-controversial measures.

At some point in 2016 or 2017 at the latest, the opposition parties are almost certain to unite in a vote of no confidence on some major issue - bringing down the government. This would force a new election in spite of the theoretical requirement that Parliament should serve a fixed five-year term.

The near-certainty that whatever government emerges in May will fall within a year or so, raises the third and most troubling business issue. A snap election in 2016 or 2017 is most likely to produce an overtly euro-skeptic government, committed to taking Britain out of the European Union.

Since a continuation of the current coalition is almost impossible because of Tory commitment to an EU referendum, which the Liberals oppose, Cameron may only be able to lead the next government if his party wins an outright majority or forms an alliance with the Scottish Nationalists, UK Independent Party and other fringe parties. An outright Tory majority is out of the question, according to current opinion polls, and time is running out for the surge in support the Tories were expecting as a result of economic recovery.

A Tory government supported by Scottish Nationalists and UKIP is a more plausible option. But the glue holding together such a coalition would be an EU referendum on membership terms that the rest of Europe would be extremely unlikely to accept.

UKIP would certainly press for such an impossible negotiating mandate and even the Scottish Nationalists would do so for tactical reasons. The Scots would insist that a British vote to exit the European Union should be followed immediately by one on Scotland leaving Britain. And in this second referendum, the generally pro-European Scots would almost certainly vote to leave. The chaotic breakup of the constitutional status quo would then be complete.

An EU exit might, paradoxically, be even more likely if a Labour-Liberal coalition comes to power in May. Though both parties are committed to keeping Britain in Europe, a weak Labour-Liberal government would face falling business confidence and possibly a sterling crisis. So it would be even more likely to fall in a snap election than a Tory-Nationalist coalition.

Meanwhile, the Tories, forced into opposition, would undoubtedly replace Cameron as leader with a more hard-line euro-skeptic - possibly Boris Johnson, the popular and populist mayor of London. If so, the snap election in 2016 or 2017 would probably result in a landslide for radically euro-skeptic Tories in alliance with the UK Independence Party. A quick referendum mandating the new government to negotiate an exit from the European Union would then become an odds-on bet.

All these scenarios can, of course, be qualified with numerous ifs and buts. Many political surprises will surely occur between now and 2017. In the end, the instinctive caution of the British electorate might well prevail - as it did in the Scottish referendum - preserving the status quo of British membership in the European Union.

But whatever ultimately happens, outbreaks of political panic are near-certain in the six months before the general election. Then again during the period of turmoil and ungovernability leading up to a snap election and EU referendum in 2017.

Investors and businesses in Britain are queuing up for a roller-coaster ride.

© (c) Copyright Thomson Reuters 2014.

©2021 GPlusMedia Inc.

37 Comments
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I for one am praying for UKIP to win next year. The EU has, over the last forty years, grown into a tyrannical beast that no one in the UK voted to be a part of... Open door immigration is complete lunacy when considering the future of the UK and its people... The only people who truly see the benefits of the EU are big businesses and not the working class communities who have been sold down the river time and time again by politicians...What's next? An EU armed forces? Oh, it's already here... The EU experiment has failed and the UK should go it alone to make trade pacts with commonwealth countries...

-1 ( +0 / -1 )

Its easy to just say "he's a fool" with no justification. What evidence is there that Miliband could run the country any better? Who can trust career politicians who've spent their whole time within the political system climbing the ladder for the sake of it? Farage was a successful trader back in the day, made serious money, and now the leader of a party that is scaring the pants off Lib/Lab/Con. Runs rings around anyone who gets into a debate with him (poor old Cleggers). Not bad for a fool.

-2 ( +0 / -2 )

Why is it that Ukip has made startling political gains? The British are voting for Ukip, that is why!

Bizarre confusion of cause and effect there.

0 ( +1 / -1 )

He might do a better job of it than Cameron eh? Why is it that Ukip has made startling political gains? The British are voting for Ukip, that is why!

Mr Farage is far from being a buffon.He is an experienced MEP.

A lot of what he says makes sense.....

-1 ( +1 / -2 )

@Thunderbird

Well said. The man's an absolute fool.

Sure he's enjoying his fifteen minutes of fame, but he wouldn't have a clue how to actually run the country.

Foghorn-gobbed idiot.

-1 ( +1 / -2 )

Farage is just another in the line of one-policy party leaders who'll eventually be found to be the idiot that we all think he is, and his Nasty Party will sink into a bog where it belongs.

0 ( +2 / -2 )

@Nessie

Isn't that what the rise of UKIP means! Isn't that what the British are doing right now? The very fact that the somebody like Farage can gather votes and power is surely a case of the system being fair and not tryrannical! The British are tired of the charade that has been perpetrated by both Labour and Conservatives

1 ( +1 / -0 )

@Thunderbird2 I agree. I'm sure whoever gets in will keep allowing big business to evade billions in taxes while banging on about the fraction of this money pocketed by those ripping off the benefits system. Whatever permutation is thrown up ( pun most definitely intended ) from Lab/Lib/Tory/SNP/Kipper, big business will have nothing to lose sleep over.

1 ( +1 / -0 )

Jimizo Rod Liddle Spectator article is a absolute gem....

Who are Ukip’s new voters? The kind of people who decide elections....

http://www.spectator.co.uk/columnists/rod-liddle/9335821/who-are-ukips-new-voters-the-kind-of-people-who-decide-elections/

0 ( +0 / -0 )

@Reckless Cultural differences, your Chicken Little was originally called Chicken Licken in the UK.

0 ( +0 / -0 )

What a load of hyperbolic garbage!

0 ( +1 / -1 )

Yay, another scare-mongering story. You know, I must be living in an alternate reality... the UK I live in is a lot more stable than this article would imply.

0 ( +2 / -2 )

@dcog I'm not sure your 'lazy workers' idea about why UKIP has become popular is very helpful. A large percentage of UKIP voters are retired. I think the Spectator summed it up well:

'Indeed, the votes Ukip are picking up now are the people who have decided most of our recent general elections, from Mondeo Man through to Worcester Woman. Hard-working, anti-toff, middle-income, tough on that besom Laura Norder, virulently anti-immigration, politically incorrect and most of all, feeling let down by the three main parties.'

I think the 'most of all, feeling let down by the three main parties' is on the money. I know how they feel but a vote for the nutters in UKIP is a step towards a Tory/kipper alliance. Something which will allow the tooth and claw Tories to do something too awful to think about to the UK.

2 ( +3 / -1 )

But I didn't say they are only things that are important, far from it.

Sorry, I mean to say "one of the most important things".

I just wanted to allude to the fact that fear-mongering of immigration is generally not based on any sort of fact, and is largely a knee-jerk reaction to any sort of perceived negative state of things, where the situation is easily abused by populists and groupthink. Eg. some of the most ardent UKIP supporters are in the small Midlands towns where foreigners might number less than 4-5% of the population. Those who complain or preach negativity are always the loudest.

1 ( +2 / -1 )

@Reckless

It's "Chicken Licken" in the British version of the story.

0 ( +1 / -1 )

Well no amount of rationality will matter if the only things that are important are abstract concepts such as "social cohesion" which cannot be quantified and for all intents and purposes doesn't really exist..

But I didn't say they are only things that are important, far from it.

0 ( +0 / -0 )

@Elizabeth Heath "This article appears to have been written by Chicken Licken."

You made my day with that! Chicken Licken is a soul food chain in South Africa. Maybe you mean his cousin Chicken Little who thought the sky was falling when a flying overhead bird crapped on him. As they say at Kentucky, it is finger licken good!

-2 ( +1 / -3 )

There may be a small positive effect on GDP and tax revenues because almost all migrants are of working age. So big business gets more cheap workers and their cash reserves get larger. It doesn't improve living standards. Its the effects on infrastructure and services that are the problem. Unless you build houses, schools, hospitals, roads and train lines like crazy - things the UK has never been, and never will be, able to do. There's also less quantifiable things such as social cohesion and identity - the things people have been told they're racist for caring about, hence the popularity of UKIP.

Well no amount of rationality will matter if the only things that are important are abstract concepts such as "social cohesion" which cannot be quantified and for all intents and purposes doesn't really exist..

You do realise that if UK isn't willing to uphold freedom of movement in the EU, then 2 million migrant Britons currently in the EU (outside of UK) are all at risk too. Seeing as the vast majority of them are retirees, the costs to them would be far, far worse than denying rights to young Poles who are willing to work their arses off. Retiree Britons apparently cost Spain alone 1 billion Euros a year from subsidised healthcare, etc.

I may be wrong, but the only reason I can see for the rise of parties like National Front, Jobbik, UKIP, etc. is due to lazy workers who can't be bothered in picking up their game and becoming skilled workers. You'll find these are the same guys who are adamantly against globalization and all that as well.

1 ( +2 / -1 )

I think you'll find that virtually every single British study on the effects of immigration on the UK has been incredibly positive, so much so that immigrants are actually subsidizing UK residents more than the other way around

There may be a small positive effect on GDP and tax revenues because almost all migrants are of working age. So big business gets more cheap workers and their cash reserves get larger. It doesn't improve living standards. Its the effects on infrastructure and services that are the problem. Unless you build houses, schools, hospitals, roads and train lines like crazy - things the UK has never been, and never will be, able to do. There's also less quantifiable things such as social cohesion and identity - the things people have been told they're racist for caring about, hence the popularity of UKIP.

-1 ( +1 / -2 )

This article appears to have been written by Chicken Licken. This article is full of hysterical nonsense. The UK (not Britain, look it up) will not be 'ungovernable' after next year's General Election - even if there is no party with an overall majority coalitions of some kind will form. If there has to be another election soon afterwards so be it - that's democracy for you. The UK will not be leaving the EU, even the most foaming at the mouth UKIP supporter realises they will never achieve a majority, and no other party will have enough balls or stupidity to put the UK is such an isolated position. As for Scotland, if they want o be independent it's up tot hem. They voted no last time and if it comes to the crunch they will again, to steal Nye Bevan's quote about the medical profession, the government has 'stuffed their mouths with gold'

-4 ( +0 / -4 )

Most British people now accept, and the Labour Party admitted, it got the question of immigration wrong in the Blair years and the mass influx of people to the UK was wasn't beneficial.

I think you'll find that virtually every single British study on the effects of immigration on the UK has been incredibly positive, so much so that immigrants are actually subsidizing UK residents more than the other way around. Do you have any actual source info on what you mentioned here?

-1 ( +1 / -2 )

Yes, next years election is unpredictable, which means almost all of this article is completely random guesswork. The writer seems convinced whatever government is formed will collapse within 2 years, but people said that of the current coalition and it never happened. A minority government could work. I'd like to see MPs vote more freely based on their convictions rather than party allegiance.

Hopefully Nigel Farage can help put an end to this era of career politicians who say what they think people want to hear. He's the only party leader at the moment who you can be clear what he stands for, and thats really helped him connect. Cleggers will get into bed with anybody and Miliband doesn't know whether he's coming or going. Farage will annihilate them in the TV debates.

-2 ( +1 / -3 )

Up to 200 Conservative MPs are in favour of EU associate membership status, Bill Cash, Conservative grandee reportedly suggested. Expect a UKIP coalition if Labour don't counter the right wing press, who are extremely adapt at provoking a increasingly angry and disaffected electorate. I too take a measure of satisfactory delight in watching the front benches thrashing around in there embarrassing attempts to cling onto power.

0 ( +1 / -1 )

'UKIP is a joke and the UK should be ashamed of itself for letting a party like that become so influential.'

Why should they be ashamed? Should the UK be ashamed of the Labour and Conservative parties? I'd estimate half of the Tory party and their supporters hold views very similar to those of UKIP regarding Europe and immigration. The Tories have been cutting each other's throats over Europe for decades. As for Labour, one of the most thoughtful and fiercest critics of an undemocratic and bureaucratic union was from its left wing high priest Tony Benn.

UKIP's popularity has come about because the issue of immigration became untouchable in the UK and anyone who spoke out in favour of control was suspected of being a racist. Most British people now accept, and the Labour Party admitted, it got the question of immigration wrong in the Blair years and the mass influx of people to the UK was wasn't beneficial. UKIP is a coalition of rightwing Tories, bigots and disaffected voters but as much as I hate to admit it, the fact that they gave the major parties a kick up the arse on this issue is a good thing despite the bigoted motives of some in that party.

-1 ( +1 / -2 )

Ruthless exploitation with some employers as they race to the bottom in wage remuneration must be factored in. I run around in fury kicking imagery phantoms, when I hear the shameless hypocrisy of the left as well as the right political elite, as they treat the electorate as gormless nicompoops.

An example would be unscrupulous naked greed of MP expense scandal. Jacqui Smith, the former labour home secretary, my jaw hit the coffee table when Mrs Smith claimed for the adult films watched by her husband. Then we have Douglas Hogg, a Tory MP who claimed expenses for moat cleaning, piano tuning and mole extraction from the lawns of his country pile.

UKIP electoral success is as much a direct result of the contempt shown by MP's to the 'electoral unwashed' allegedly blurted out on social media curiosity of Her Majesty's chosen representatives.

0 ( +1 / -1 )

UKIP is a joke and the UK should be ashamed of itself for letting a party like that become so influential.

The underlying causes are all the same once again; unskilled workers losing their jobs to cheaper and more efficient means and complaining while not making any effort whatsoever to make the transition to skilled labour. Having an increasingly larger share of the population unskilled and lazy is the biggest danger to democracy

0 ( +2 / -2 )

The only reason America survived the Democrats great recession is they lost their full control, effectively rendering the US government powerless.

The only problem with that sentence is that it was the Republicans great recession, as the democrats did not come into power until after it was in full swing.

3 ( +4 / -1 )

The only people who will lose when politicians can't impose their parasite laws, is the politicians themselves. the British people will Do well. The only reason America survived the Democrats great recession is they lost their full control, effectively rendering the US government powerless. The fewer laws passed the better it is for the people.

-7 ( +0 / -7 )

the situation in the UK is such that English people are in fact asserting their political rights-isn't what democracy is all about?

It depends what rights. Tyranny of the majority is not democratic.

1 ( +3 / -2 )

Failure to overhaul constituency boundaries in January 2013, Cameron Conservatives were defeated in a commons vote, the first occasion there Lib Dem coalition partners voted with the opposition, gifts Labour a statistical advantage. A reduction from 650 to 600 seats would have evened up electoral numbers in each seat. The arithmetic will mean Labour will still win more seats/MP's even on a equal share of the vote as the Conservatives.

Only two weeks ago SNP Deputy first minster of Scotland Nicola Sturgeon flatly ruled out propping up a Conservative government, 'never ever would I impose a Conservative government on Scotland'. If Sturgeon is true to her word it is fanciful to call a SNP/Conservative coalition.

The 2015 May 7th Election will be the most import election in living memory. If the Conservatives can convince the Electorate that they can win back national sovereign powers on a range of issues from the EU commission then this could neuter tactical voting in UKIP's favour, also winning over marginals from Labour, that could even return a Conservative majority. EU membership and the NHS survival will be key vote winning issues. SNP is predicted to punish Labour severely in Scotland. Miliband has Wallis and Gromit written all over him, a point not lost in the ferocious UK media. It will be negative from the off, vicious and downright dirty. Nauseatingly nasty.

0 ( +1 / -1 )

I disagee, the situation in the UK is such that English people are in fact asserting their political rights-isn't what democracy is all about?

0 ( +2 / -2 )

while the UK Independent Party will likely insist on Britain’s withdrawal from the European Union. It is hard to imagine either Labour or Conservatives agreeing to such terms.

According to the papers today (Nov 29th), Cameron is telling the EU to give us more freedom to tackle our immigration crisis or we'll pull out of the EU. And it's immigration that will form one of the key arguments in the election. Whoever makes the most optimistic promises about tackling immigration and benefits scroungers is going to garner a lot of support, whether they're blowing hot air or not. UKIP has the edge on immigration policies. The Tories as a party want to crack down on benefits cheats, but to do so they'd have to remove Cameron from top spot. Boris Johnson would be a viable replacement. He can come off as eccentric at times, but when it comes down to it, he's better at keeping his word than some politicians I could name.

I find it highly unlikely that Labour will ever take power again. Not in the next few decades anyway. There's too much hurt feelings. Blair opened the flood gates to immigrants and dragged us into the conflicts in Afghanistan and Iraq. Those ended up ruining him. Gordon Brown was lumped with the Prime Minister role after that, and he fumbled. It was unfair that he got a mess dumped on him, but he had plenty of time to at least start to turn things around. That didn't happen either. Now we've got a coalition government headed by an upper class twit and a spineless buffoon. I think the next four or five elections will always end in the formation of coalition governments, until someone with enough charisma and voter confidence can sweep a majority.

Whatever the case, I don't think it'll be quite as turbulent as the article makes out, unless one of the Nationalist parties makes a rash move. If I had to make a guess, I'd say it'll be Plaid Cymru who throws fuel on the fire. Anti-English sentiment has been pretty strong in Wales since the late 70's, and in very recent years there's been a resurgence of Anglophobia, with hostility and violence against English people starting to increase. After the election in May, that's when things could get interesting, and unpleasant, unless this Anglophobia can be curbed.

0 ( +3 / -3 )

Both Labour and the Tories are paying the price for their complacency. Labour abandoned the poor and low-paid under Blair in the belief they would vote for them anyway. The Tories from Thatcher onwards turned the party into a party of the English south and shires believing that vote was in the bag as long as they threw the odd hissy fit about Europe or immigrants to keep the Daily Mail happy. They were both wrong. The Scottish Nationalists are a bigger threat to Labour than UKIP are to the Tories and the nightmare scenario is a Tory/UKIP alliance. If that happens, I'm sure we'd see favourable conditions for the rich but it would be a moral abomination even filthier than anything we saw under Thatcher.

3 ( +4 / -1 )

Interesting indeed. Is there a cold wind blowing around businessmen's feet, or just around the writer's?

From Wiki: "Beginning in 1990, Kaletsky was Economics Editor of The Times, and later became Editor-at-Large. In early 2012, Kaletsky began his new post, in the Analysis and Opinion section of the Reuters online newspaper, where he writes a weekly column. His articles also appear in print around the world in the International New York Times. Like many economists, he has made predictions that were contradicted by subsequent events, and this tendency was noted by the satirical magazine Private Eye. For example, Kaletsky wrote, "… I am one of the few economic commentators who has consistently made light of the anxieties about a “day of reckoning” for British homeowners and consumers …"

0 ( +1 / -1 )

The UK's decision NOT to join the Eurozone may have been a boon to their economy, because during the 2010-2011 sovereign debt crisis, there was real fear of a sovereign debt default by Portugal, Italy, Greece or Spain that would unravel the Eurozone in no time flat with horrible financial consequences--and would have taken the UK with it had they been part of the Eurozone.

3 ( +5 / -2 )

This is all very well-worded and interesting, but the real message seems to be: "Increased democracy in Britain is bad for business".

1 ( +3 / -2 )

Regardless of what happens, Britain rejected the euro. And that will always give Britain a lead and advantage over its Euro chums.

4 ( +6 / -2 )

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