On 18 August the British coalition government will have been in office for 100 days, a period generally regarded as the duration of the political honeymoon that a newly-elected government can anticipate. Though the concept of a 100-day political honeymoon is better understood in the US than here, it has particular resonance now because of the way in which the media initially portrayed the alliance between David Cameron and Nick Clegg as a ‘marriage’.
The coalition has started remarkably well, but there are big challenges in sustaining the early radical momentum and, more importantly, in winning the domestic political battle for ‘hearts and minds’. The British public needs to come to a consensus answer to one overriding question: Does the coalition government represent a decisive, libertarian change in the country’s political direction, or is it merely a cleaning-up parenthesis between periods of statism, waste and intervention?
Cabinet office minister Francis Maude recently claimed that the Cameron administration had started its term of office more radically than those of either Margaret Thatcher or Tony Blair. If this claim is true – and I believe that it is – then this radicalism is an appropriate response to a truly awful economic, political and social legacy.
For a start, the fiscal deficit inherited by this government is, at 11%, far more severe than that which confronted Thatcher (5%), let alone Blair (3.4%). Worse still, the structural element of this deficit is far higher than those of the US, Japan, France or Germany.
The June Budget, while as much a statement of intent as a definitive plan, plots a generally astute road-map to fiscal sustainability. The required cuts in public spending are perfectly feasible given the reckless expansion in government expenditures that occurred between 2000 and 2009.
On the political front, the coalition has found a flagship policy theme that can be described as a ‘liberty agenda’. Led by deputy PM Nick Clegg, this agenda aims to deliver political reform while at the same time rolling back many of Labour’s numerous erosions of civil liberties. This agenda could be the bedrock of the coalition’s political appeal in the future, creating ‘clear blue water’ between Conservative-Liberal Democrat libertarianism and Labour statism.
This programme, which unites the Liberal Democrats’ traditional support for individual liberties with the Tories’ instinctive dislike of ‘big government’, can, if sustained, be the coalition’s biggest achievement, and its political trump card.
If the fiscal imperatives are pretty obvious – tackling an unsustainable deficit, and heading off what could otherwise become a vortex tendency in national debt – then the political imperatives are almost equally easy to define.
For the coalition parties to win the next election and thus ensure continuity, three objectives are paramount. The first of these, unity within the coalition, is imperative. The second is the need to develop a flagship ideology to which the public can relate, with the libertarian agenda by far the best option. And the third is to engineer a fundamental change in public attitudes, such that liberalism comes to be seen as the norm rather than as a temporary interruption to Labour statism.
Labour may be discredited, dispirited and virtually devoid of leadership talent, but the coalition cannot afford complacency. Since 2008, the impact of recession has been staved off by a variety of unsustainable expedients such as high government borrowing (equivalent to 18% of current GDP over just two years) and the printing of money through quantitative easing (a further 14% of GDP).
As the effect of these expedients drops away, consumers who have actually felt better off (through sharp falls in mortgage payments) have a delayed date with austerity. This, in turn, makes a ‘double-dip’ recession – or something very like it – almost inevitable.
Maintaining public support through a period of economic hardship will not be easy. But it can be achieved, if the coalition sustains the radical dynamism that it has displayed during an excellent (and refreshing) political honeymoon.
Dr Tim Morgan is global head of research at Tullett Prebon. This is an edited version of a Strategy Note published on 12 August
