Margaret Thatcher became Prime Minister in 1979, she quoted St Francis of Assisi on the steps of 10 Downing Street; after Tony Blair triumphed in 1997, he was greeted by Labour Party workers waving union jacks and a great wave of public optimism. David Cameron’s victory speech yesterday was far more somber and humble, reflecting the very different mood of our straightened times; it was devoid of the hubris and triumphalism that all too often mar political discourse. In the background, one could hear the angry chants of the Labour party supporters and socialist activists that had congregated at Downing Street’s gates, as well as the cheers of Tory supporters. Three different times; three very different speeches; and three very different leaders.
City A.M. wishes Cameron and his team – including George Osborne, the new chancellor – the very best of luck; the task ahead will be monumental, with the British economy in a far worst state than most people realise. The UK’s budget deficit will be greater than Greece’s this year; the public finances are on an unsustainable path and need urgent attention. Rarely has a new Prime Minister been handed such a disastrous legacy; Britain’s competitiveness is in accelerating decline, government spending has risen to an unsustainable level of well over 50 per cent of GDP on OECD figures, the armed forces have been starved of resources and the entirety of the public sector is in need of radical root and branch reform. If he delivers on all of these issues, and is willing and able to brave opposition while preserving what will inevitably be his fragile coalition, Cameron could yet go down in history as a great reforming statesman. We certainly hope he will succeed. We endorsed the Conservatives and hoped that they would win and be able to rule alone; but better a Tory-led coalition than a Labour-Liberal deal. Not all Lib Dem policies are bad: to take everybody who earns less than £10,000 a year out of income tax is a great idea that the Tories should have adopted themselves many years ago. Other Lib Dem policies are less good – and some outright destructive – though many of the worst have now been ditched, as Nick Clegg’s party traded principles for seats in governments.
Regrettably, it did seem last night that capital gains tax will be going up, but there may be an exemption for business and entrepreneurial gains. We will know more today. One of the Tories’ weakest policies was their approach to banks, which was long on populist rhetoric and short on evidence-based, rigorous analysis; unfortunately, that was also one of the areas which they saw eye to eye with the Lib Dems on. With Vince Cable entrusted with this crucial area, there may be bad news here for the City and hence for the jobs, prospects and incomes of tens of thousands of people, including many readers of this newspaper. Again, we shall reserve judgment on this until the full proposals are known, hopefully later today.
The tragedy of the election campaign was that all three parties downplayed the need to make spending cuts and tighten the public finances. There was much exaggerated bluster about the Tories’ plan to trim the public finances by £6bn – a trivial half a per cent of GDP – but now the new government is likely to push through much greater spending cuts. The question is what the reaction of many Lib Dem supporters will be: a substantial number are to the left of Labour and didn’t think that their votes were going to back a Tory-led government committed to drastic fiscal tightening. How they react will be crucial to the long-term viability of the coalition; at the same time, Tory backbenchers and supporters will also be very angry about many of the concessions required to form this government. They too may sooner rather than later begin to look for ways to derail it.
There will be five cabinet posts for the Lib Dems and around twenty jobs in government; they only have 57 MPs so this will buy lots of support. It also means many Tories MPs will lose out. It is therefore an open question how long a coalition can last. Given the challenges facing Britain, and the need for strong government to tackle the public finances, we must hope that this government lasts for at least a year and is able to push through one or two successful budgets and a tough spending review. The David Cameron era has begun; at the very least, this new coalition government deserves the benefit of the doubt.