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How has the UK's Coalition Government performed?
The May 2010 Conservative-Liberal Democrat coalition government was heralded by some as a brave new departure for British politics. Almost five years on, Simon Lee finds the Coalition has largely failed in its promise to produce radical political, economic and social renewal.
That coalition government returned to the United Kingdom during May 2010, in an age of financial crisis, economic recession and promised fiscal austerity, should not have surprised students of British political history. Benjamin Disraeli may have famously remarked that ‘England does not love coalitions’, but the history of the 20th century has suggested otherwise. The current Conservative-Liberal Democrat coalition has simply been the latest coalition to have involved these two political parties, and to have been formed at a time of national crisis, following those created in May 1915, December 1918, October 1931, November 1935, and May 1940.
In its formation, however, the Cameron-Clegg Coalition had two key features that distinguished itself from its predecessors. First, it was formed because of the absence of a parliamentary majority for a single party at Westminster. Second, this was an ideological coalition of the willing, not just a marriage driven by political expediency. Both political parties were fully consenting partners. They chose to govern as a coalition, and as a ‘partnership government’, reflecting their leaders’ conviction that their respective political visions would, in their own words, be ‘strengthened and enhanced’, rather than compromised, by working together.
An Ideological Marriage
The Coalition's formation was greeted as something of a novelty and departure in modern British politics. But in truth, each of the five major modernisation projects launched by political parties since May 1945 (what I term ‘the British Ways of modernisation’) had been based upon a similar ideological coalition between liberalism and a rival political ideology (Lee, 2015).
The Conservative Party began its march towards the present ideological coalition between the forces and interests of conservatism and liberalism, not during nine days of frantic inter-party negotiation in May 2010, but 36 years earlier. In June 1974, following the failure of the Conservative Party to win a majority at the February General Election, two former Cabinet Ministers in the discredited and defeated Heath Ted Government, Margaret Thatcher and Sir Keith Joseph, established a new think tank, the Centre for Policy Studies. Their purpose had been to create an institutional mechanism to transform the very terms of the postwar political settlement, which they claimed had left British politics ‘over-governed, over-spent, over-taxed, over-borrowed and over-manned’, and stranded on the social democratic middle ground of failed stateled modernisation. Thatcher and Joseph abandoned the technocratic blueprints of One Nation conservatism, for an ideological coalition combining market liberalism with a strong state. Their stated ambition was to move British politics rightwards towards a common ground founded upon the aspirations of the British people, rather than a compromise between politicians.
Consequently, it was perhaps not entirely unexpected that the Cameron-Clegg coalition should boldly promise in 2010 ‘a programme for partnership government’ with ‘the potential for era-changing, convention-challenging, radical reforms’. After all, more than three years before the coalition's formation, in 2007, David Cameron had affirmed that ‘I have a philosophy – liberal Conservatism – which has the answers to the great questions our country faces’. A coalition between conservatism and liberalism had long shaped Cameron's thinking on both domestic and foreign policy questions.
The Coalition duly promised radical reforms that would translate into economic renewal. There was to be ‘a new economy from the rubble of the old’; social renewal in ‘a Britain where social mobility is unlocked’; and political renewal through the Coalition's commitment ‘to turning old thinking on its head and developing new approaches to government’. However, with just months to go until the May 2015 General Election, it is now evident that the Coalition has not delivered and will not deliver on its promise of ‘era-changing, convention-challenging, radical reforms’.
In government, the Coalition has been unable to agree compromises between each of the partner's favoured options for political reform. For example, under the terms of the Parliamentary Voting System and Constituencies Act 2011, and following the 2013 Sixth General Review of Parliamentary constituencies, the Conservative Party had hoped to secure a reduction in the number of Westminster parliamentary constituencies from 650 to 600, and a greater equalisation of the number of voters in each constituency through the redrawing of constituency boundaries. This would have corrected an historic electoral anomaly that favours Labour, which benefits from having its voters predominantly concentrated in urban constituencies with smaller electorates.
In August 2012, however, Nick Clegg announced that plans to reform the House of Lords, a longstanding and cherished Liberal Democrat reform had been dropped, and so, consequently, he would instruct his MPs not to vote for the implementation of the Boundary Commissions’ recommendations on redrawing electoral constituencies. In a single stroke, David Cameron's chances of winning a majority at the May 2015 General Election were significantly diminished.
A new economy has not yet been built from the rubble of the old. Indeed, the very fact that any government could still think that such a major strategic challenge could be accomplished within the timeframe of a single five-year-term of office was itself indicative of a broader absence of realism and strategic thinking among the British power elite.
This lack of realism is particularly surprising given the evidence of the past 41 years. During that time, a succession of British governments had been elected promising to reverse the United Kingdom's relative industrial decline. Following their failure to re-balance the economy in favour of manufacturing, each duly resorted to reforms of the credit supply and fiscal stimulus measures to stimulate the domestic housing market, which then resulted in a sequence of unsustainable consumer, debt and propertyled economic booms, interrupted by periodic financial crises, economic recessions and bursts of fiscal austerity.
From September 1971, when the Competition and Credit Control Act, initiated by Heath's Chancellor of the Exchequer, Anthony Barber, begun the liberalisation of credit supply, virtually every subsequent Chancellor of the Exchequer prior to George Osborne's tenure has presided over this same cycle of economic boom, financial crisis, economic recession and periods of fiscal austerity. With real wages static for the majority of the workforce in both the public and private sectors, the Coalition has simply added to the indebtedness of ‘Generation Debt’, resorting to the same pattern of credit-fuelled and property-market driven growth as has been advanced by every Chancellor since Anthony Barber first let the credit genie out of the bottle.
The Coalition in Office
The Cameron-Clegg government, which combines 306 Conservative MPs and 57 Liberal Democrats, has served as the United Kingdom's first peacetime coalition government since the 1930s. With a Cabinet currently comprising 17 Conservative and five Liberal Democrat ministers, the Coalition has aimed to maintain its unity, goodwill, mutual trust and collective responsibility through ‘The Quad’ of four senior Ministers: two Conservatives (Prime Minister David Cameron and Chancellor of the Exchequer George Osborne) and two Liberal Democrats (Deputy Prime Minister Nick Clegg and Chief Secretary to The Treasury Danny Alexander). The Quad has met regularly to agree all major strategic policy issues, including the content of the Budget.
All six Cabinet ministerial resignations from the Coalition have been for personal reasons, rather than over matters of policy or the Coalition itself. Ahead of the 2015 General Election, each of the Coalition partners is seeking to persuade sceptical voters the Coalition was correct in its initial identification of reduction of the United Kingdom's annual budget deficit and continuation to economic recovery as the most urgent issues confronting the country, and that the main burden of deficit reduction should be borne by reduced public expenditure rather than increased taxation.
Recovery Built on Debt
From the outset, George Osborne's economic reform agenda was based upon significant additions to the individual and collective public and private debt burden. Osborne's June 2010 Budget announced plans to borrow £452 billion over the lifetime of the Coalition, which would leave public sector net debt at the end of March 2015 at £1284 billion or 69.4 per cent of Gross Domestic Product (GDP). According to the latest data on public finances produced by the Office for National Statistics, by the end of August 2014 the national public debt had already soared to £1432.3 billion or 79.1 per cent. Indeed, if the ‘temporary’ debts arising from the bailout of the banks was to be included, that debt would swell to £2285.3bn or 125.8 per cent of GDP.
This is only half the story. The Coalition's ‘unavoidable deficit reduction plan’ focused almost exclusively on the reduction (or rather, a reduction in the rate of increase) of public debt. Far from being built upon a ‘re-balancing’ led by private investment or Osborne's ‘march of the makers’, the promised economic recovery would be driven by private consumer spending funded by increasing household debt. Consequently, the Office for Budget Responsibility forecast that total private household debt would increase over the lifetime of the Coalition by no less than £526 billion, from £1560 billion to £2126 billion, or from 160 per cent to 175 per cent of total household income (see Figures 1 and 2).
From the outset, Osborne's economic recovery intended to add to more expensive private household debt at a faster pace than it added to cheaper public debt, but the combined total means that the ‘unavoidable deficit reduction plan’ has planned to add nearly £1 trillion to the nation's accumulated public and private debts over the lifetime of the Coalition. Furthermore, the OBR's March 2014 Economic and Fiscal Outlook has suggested that after the May General Election, total household debt will increase by the end of March 2019 by a further £566 billion, from £1685 billion to £2251 billion, or from a 145 per cent to 166 per cent of total household income. March 2019 is the juncture at which Osborne's plans have forecast that the public finances will return to a small surplus.
Osborne also chose to sustain the Brown Government's policy of monetary stimulus by extending the Bank of England's programme of buying assets, principally government bonds, from commercial banks, as a means of supplying those banks with new liquidity to lend to enterprises and entrepreneurs, at very low rates of interest, and thereby stimulate economic recovery. However, as early as August 2012, the Bank of England conceded that a principal effect of this £375 billion, asset purchasing Quantitative Easing (QE) programme, had been an average boost to the assets of the richest 10 per cent of the population of between £128,000 and £322,000. Thus, 40 per cent of the gains to asset values wrought by QE had gone to the top five per cent of income earners. QE's effect had been not so much ‘trickle-down’ as ‘deluge-upwards’ economics.
Furthermore, official statistics from the Bank of England have also revealed that QE has not resulted in an increase in net lending to enterprises. On the contrary, the Bank's own official statistics for trends in lending have revealed that in every year under the Coalition net lending to UK businesses (both large and small) has been negative. Businesses have repaid debt, rather than borrowing to invest, innovate or expand their enterprises. Credit has instead flowed to the overheating property market and helped to fuel property prices.
QE has failed, and not surprisingly, the economy has not been rebalanced towards private investment, exports or manufacturing. Indeed under the Coalition, the UK economy has grown at less than half the rate forecast at the time of the June 2010 ‘Emergency’ Budget (see Figure 3).
When the United Kingdom's current account balance is added to its capital account balance, it serves as a measurement of the degree to which the UK is a either a net lender (i.e., in surplus), or a net borrower (i.e., in deficit). As the Office for National Statistics’ accounts have recorded, in every year since 1983, and in every quarter since the third quarter of 1998, the United Kingdom's national accounts have been in deficit. Osborne's economic plan has not reversed this trend. Far from rebalancing, the economy has become more imbalanced and skewed towards the financial services sector and the economy of London and the Southeast. In 2012 and 2013, the UK's current account deficit was £61.9 billion or 3.7 per cent of GDP and £72.4 billion or 4.2 per cent of GDP, climbing to £23.1 billion or 5.2 per cent of GDP during the second quarter of 2014. Osborne's goal of £1 trillion worth of exports by 2020 appears fanciful. In 2013, total exports amounted to £511.3 billion, barely half the stated target.
No New Politics
The Coalition's Programme for Government has also failed in its promise to unlock social mobility. The fact that so many of the Cabinet, whether Conservative or Liberal Democrat, share in common a public school and Oxbridge education, and a millionaire, multi-propertied status has not gone unnoticed by a sceptical and disillusioned electorate. The Coalition, too, has not been able to turn old thinking on its head or develop new approaches to government. In no sense has it broken the mould. That the Coalition's statecraft would be characterised by continuity rather than change was signalled from the moment of Andrew Lansley's profoundly top-down reforms of the NHS in England. In its agenda for the reform of public services in England, the Coalition has not departed from the ‘developmental market’ agenda for British modernisation pursued by the Conservatives under Margaret Thatcher and John Major, and the Labour Party under Tony Blair and Gordon Brown.
The essential and inescapable truth is that, in the final, turbulent year of the Coalition, politics at Westminster remains stranded on the common ground of the ideological coalition between conservatism and market liberalism, first mapped out by Margaret Thatcher and Sir Keith Joseph some 40 years ago. In its rhetorical commitment to the inevitability of austerity, and its resort to debt-led, consumer-led growth, the Cameron-Clegg Coalition government has firmly occupied that same common ground. Coalitions between political parties may last no more than one fixed term, but ideological coalitions can have a much longer shelf life as the past 40 years of British politics attests.
- Beech, M. and Lee, S., (ed.) (2015) Coalition Politics Evaluated: Examining the Cameron-Clegg Government (London: Palgrave Macmillan).
- Lee, S. (2015) The State of England: The Nation We're In (London: Palgrave Macmillan).
Simon Lee is Senior Lecturer at the Centre for Political Economy, School of Politics, Philosophy and International Studies, University of Hull.