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The promise of an “age of austerity” must rank as one of the least likely political slogans of recent years. But Britain is about to stage a general election in the most unusual of circumstances – in the shadow of the biggest government deficit of any major economy.

The UK deficit is scheduled to hit £178bn this year – more than 12 per cent of GDP. Some international investment houses have started to turn their backs on UK government bonds. The economy will dominate the general election.

David Cameron, leader of Britain’s opposition Conservatives, believes the country is ready for tough medicine. His “age of austerity” promise, made at the height of the crisis in 2008, carried a dual message: he believes both the government and the public have binged on cheap money and must mend their ways.

Nobody doubts that the Tories are ideologically up for the challenge. Mr Cameron’s centre-right party wants to complete the unfinished work of Margaret Thatcher’s administrations of the 1980s, cutting back the share of national income taken by the state after 13 years of Labour expansion. But has Mr Cameron misjudged the public mood? Britons may feel guilty for “maxing out” their credit cards, and realise the government has done much the same thing: that does not necessarily mean that they are ready to vote for an age of pain.

British retailers such as John Lewis and Marks and Spencer reported healthy sales over Christmas. In a show of classic British stoicism in the face of adversity, consumers snapped up posters and coffee mugs bearing the Ministry of Information’s wartime instruction: “Keep calm and carry on.”

Mr Cameron’s private polling tells him that whatever appetite Britons had for austerity in 2008, it may be starting to fade. Both Labour and Conservative politicians have concluded that Britain’s election will not be about the past: this is about the recovery.

The 43-year-old Tory leader, a fresh-faced former PR man for a media company, has a difficult juggling act. He has promised to trump the Labour government’s plan to halve the deficit by 2014 by moving more quickly to cut borrowing and to cut more deeply.

But he is well aware that even if the voters recognise the need to cut the deficit, they are anxious about handing the axe over to the Conservatives, whose former chairman Theresa May memorably once admitted was seen as “the nasty party”.

Mr Cameron, an old-style, paternalistic Tory, has been attempting to decontaminate his party since 2005 by adopting softer social policies, embracing the green agenda and vowing to protect key public services, notably Britain’s 60-year-old National Health Service.

He entered election year with a powerful Obama-esque “Year for Change” message, but there was a lingering confusion as to what that might entail. Mr Cameron’s slogan: “I’ll cut the deficit, not the NHS,” exemplifies his attempt to be simultaneously tough but tender.

Gordon Brown, Labour prime minister, hopes to exploit this uncertainty by suggesting that change by the Tories would be change for the worse. He argues that Tory cuts would undermine the recovery, expose the vulnerable and hold companies back.

In place of austerity, he promises an “age of aspiration”. Mr Brown stresses Labour will continue investing in hospitals, schools and the police, but refuses to acknowledge that this will mean cuts of 15 per cent or more in every other government department.

Opinion polls suggest the public has stopped listening to a leader who is seen as dour, remote and gaffe-prone – even if he is seen in some world capitals as perhaps the most decisive leader during the global financial crisis.

Labour remains more than 10 points behind the Tories in the polls. Mr Brown, who finally pushed Tony Blair out of 10 Downing Street in 2007, has since had to withstand three attempted Labour plots to get rid of him.

Whoever becomes prime minister in the election expected on May 6 – and a hung parliament remains a possibility – Britain will have to learn to depend less on financial services. “We need less financial engineering, more real engineering,” says Peter Mandelson, business secretary.

The Tories agree. Both parties know Britain needs to diversify, developing new green technologies and advanced engineering, and building on its comparative advantages in fields such as education, the arts and the media. Both parties talk about developing an industrial strategy; both parties have little money to support their words.

Banking will continue to play a big part in the UK economy, but the imposition by Mr Brown’s government of a one-off supertax on bonuses and a new 50 per cent rate on top earners is a sign that it will be some time before the country is mesmerised again by the wealth-generating machine that is the City of London.

Copyright The Financial Times Limited 2017. All rights reserved.

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