February 8, 2010 7:47 pm
The Conservative party’s sliding lead in the opinion polls has revived speculation about the possibility of a hung parliament. While the markets still expect a Tory majority, the numbers are coming down and are approaching the point where they would not have an absolute majority. This would open the door to one of two outcomes: a coalition government or a minority one.
Some fund managers have said that either would threaten Britain’s fiscal position and standing in the bond markets. They fear that an administration without a working majority would be indecisive and hence unable to rein in public spending. Britain’s sovereign credit rating would be imperilled, jolting up its debt service costs. But this feels like an overworked argument.
One of the few advantages of the stark position in which Britain now finds itself is that it has raised the stakes for politicians. Any party seen to be playing games with the economy could face the wilderness – perhaps even oblivion. There is, moreover, broad consensus from all three parties on the need for fiscal consolidation. A hung parliament might complicate any agreement about how to cut the deficit; but it should not preclude it.
This is not to say that a hung parliament would not pose problems. Britain’s political culture is built on the concept of single party government. Administrations are expected to take up the reins on the first day after a poll and there is no leisurely transfer period during which coalition agreements can be hammered out. A rushed deal would leave scope for coalition-breaking arguments down the line. There is also a risk that the largest party in a hung parliament would not seek to form a durable administration but would go for a quick second election in the hope of breaking the deadlock. That would be the last thing that Britain needs: a year-long election campaign during which a weak government deferred unpopular but necessary measures to avoid alienating the electorate.
Britain’s political class is used to an adversarial system, not a deal-making one. It would therefore ask a lot of British MPs to expect them to acquire new skills in the midst of a fiscal crisis, however often some politicians claim that they are eager to put “yah-boo” politics behind them. An outright majority for one party may be the safer outcome as it would give a clear and decisive mandate. But the threats of a few fund managers do not make it the only tolerable one.
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