Aftershocks Of The Political Earthquake

Things are beginning to settle down a little after the recent political crisis. The Prime Minister is not going and there are signs, albeit unsure ones, of some sort of recovery in the economy.

Attention is turning to the more immediate political instabilities that might be caused in the short term by business failures and unemployment and, even more important, to the major spending cuts and tax rises required to restore weak public finances.

The Economic Aftershock

The two main parties are trading insults on spending cuts, but the truth is that the Tories are trying to tell some home truths and New Labour is trying to evade them at this difficult time.

Outside the media, very much unconfirmed rumours are already spreading of a 20% VAT rate on January 1st that will affect consumer prices and small business cash flow.

As so often, if you want an honest assessment, you have go to the cold calculations of the Institute for Fiscal Studies – “The real choice is between Labour cuts and Tory cuts". They may as well have said - "and between Labour tax rises and Tory tax rises".

Meanwhile, the City of London and business are becoming increasingly disturbed at the possible effect of weak Government on the ability of the Government to keep its eye on the EU regulatory ball – or indeed on any ball at all.

Gloom amongst business leaders extends to concern that the Tories might not be any more competent. Finance capital is shifting further into the euro-realist camp and is ‘hinting’ (no more) that a soft neo-nationalist option is one that they may prefer when faced by European regulatory pretensions.

This is a self-interested lobby but Mandelson has a rather serious political problem here. He is committed to Europe and the Single Market (and implicitly the Lisbon Treaty and possibly the Euro) but the Franco-German response to the recent economic crisis could have seriously negative implications for London.

The claim here is that London’s financial interests (which, of course, have lost considerable credibility within the UK political system because of their conduct in the run-up to and during the credit crisis) is being forced to lobby against EU regulation through other European subsidiaries.

They are adamant – changes in EU regulation are the biggest current threat to UK ‘competitiveness’, threatening to kill the old if sick goose that lays the taxation golden egg and so enables at least basic service provision. Unfortunately, they have a very strong point ...

The Political Aftershock

As for politics itself, which have descended now into personality as much as policy, the media pick over the power struggles that took place to see who has risen and who has fallen.

Mandelson is jokingly referred within Whitehall as ruling his Raj as he emerges as viceroy over much policy affecting business, while Darling seems more secure than ever at the Treasury. Johnson sits as leader-in-waiting. The losers are the Blairite plotters, New Labour itself and the Prime Minister.

There is some comment that this Government’s tiredness is expressed in the sheer number of unelected, appointed persons in ministerial position. Brown's political reforms are milk-and-water and have scarcely dented public consciousness.

Although the expenses scandal had been largely displaced by the problems within the Government and Labour Party, expenses revelations about MPs, members of the House of Lords and senior quango heads continue to undermine trust in the political class.

Some leading figures who have resigned are being positioned publicly as ‘rats leaving a sinking ship’. It is said that hundreds of business people are looking to enter into politics believing that they can do better than politicians although we take this with a pinch of salt. Politics is nothing like business!

Two minor aftershocks of the political difficulties of the last week include the job prospects of MPs who lose their seats in the next election (classed as minimal) and the aggressive direct action campaign against Nick Griffin and Andrew Brons, the two new BNP MEPs, from direct action leftists.

The first will not elicit any public sympathy while the second is simply having the effect of undermining the more reasoned resistance to BNP views and creating a ‘martyr complex’ for BNP supporters. The BNP is not going to be frightened off now that it has tasted office.

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