After a hard-fought campaign spent scurrying across the country in a last-minute effort to win undecided voters, David Cameron has won enough votes to become Britain’s prime minister, assuming he can form a coalition with one of the other two parties. But why, again, does he want the job? The plain truth is that when Cameron moves into Downing Street, he’ll inherit a financial mess that’s almost unprecedented in peacetime Britain, and it carries nasty political implications. This is an election that, looking back, any sane leader might have preferred to lose.
Britain’s national accounts are in a state of abject crisis. Even by the standards of post-recession Europe, they’re scary stuff. The budget deficit stands at £163 billion, equivalent to 12 percent of GDP. That’s far above the EU average of 7.5 percent and just one point behind the figure for Greece. At the same time, the national cumulative debt—the total that the government owes its creditors—has reached a record high of £857 billion.
During the election, the parties were elliptical about how they would plug the gap in the national finances. Instead, they have preferred to emphasize painless “efficiency savings” or promises to protect spending on areas such as the health service, always a top priority at election time. Don’t look to the party manifestoes for details of how many civil-service posts will have to go or which major infrastructure projects will be junked.
But huge cuts are inevitable, as well as tax hikes—and Cameron will be their author. Tens of thousands of jobs may disappear as public services are pruned. “Repairing the public finances will be the defining domestic policy task of the next government,” said Robert Chote, director of the respected Institute for Fiscal Studies, last week. And in the reported words of the governor of the Bank of England, Mervyn King, the election victor forced to implement such measures may find his party out of power for a generation.
Unions are already squaring up for a fight—last month more than 10,000 public-sector workers rallied in London against cutbacks, chanting, “No ifs, no buts, no public-sector cuts”—but Britain has been on a binge and must live with the consequences. Over the last 13 years of Labour government, spending on the national health service and education has more or less doubled without serious rises in taxation. That’s before adding the cost of the stimulus package intended to counter the financial crisis, the bill for nationalizing some stricken banks, and the effect of sliding tax revenues in the recession.
To be sure, this isn’t Greece. There’s little serious risk of a British default. Much of the country’s borrowing is long-term, and there’s no pressing need to add to its debt burden. Still, Cameron will need definite programs soon after the election to show the markets that his government can sort out its finances. And it probably won’t end well for him: stern talk about the coming austerity is one reason why Conservative support in the polls faltered last year.
Back in 1997, when Tony Blair led Labour back to power after 18 years of Conservative rule, his party borrowed D:Ream’s hit “Things Can Only Get Better” as its campaign anthem. No longer. At least for Cameron, now that he’ll probably be prime minister, things can only get worse.