The financial disaster the British election has ignored

Matthew Lynn writing for Bloomberg News in London says that Britain is facing the prospect of Greece-like financial failure; that the three parties have not addressed this problem at all; and that a coalition with the Liberal Democrats based on having a referendum on electoral reform would be the worst distraction from these pressing problems. He says that the best thing would be for Cameron to let Labour and Lib-Dems form a coalition, which will crash in six months, and then in a second general election the Conservatives can win a real majority and then (perhaps) start facing Britain’s terrible financial crunch, which will require severe cuts in its entire social system. (Speaking of which, I’ve never seen a single article in the British press explain how the British government keeps untold numbers of people, including Muslim terror supporters, on welfare, including free residence in “council houses,” apparently for life. Have you?)

UPDATE: When I posted this, I didn’t catch the contradiction in Lynn’s argument. On one hand, he says a Labour deal with the Liberal Democrats would be terrible, because it would commit the government to a referendum on electoral reform which would be an injurious distraction. On the other hand, he says that Cameron’s best move would be to allow a Labor/Lib-Dem coalition, because it will collapse in six months alowing him to win a true majority in another election.

Lynn writes:

A deal between the Labour Party and the Liberal Democrats would be an alliance between two losers. It would be propping up an unelected prime minister. And it could be secured only with a promise of electoral reform. The idea that the U.K., in the center of a global sovereign-debt storm, should spend a year arguing about different systems for electing their politicians is absurd. They might as well spend a year discussing whether Charles Dickens was a better writer than Shakespeare.

The alternative—and the most likely outcome—is for Cameron to govern alone. There is no need for him to form a coalition with anyone: The Liberal Democrats didn’t do well enough to merit a share of the government; and his party won’t be in the mood to make concessions when it doesn’t have to. [LA replies: but this doesn’t explain how he overcomes the lack of a majority.]

Cameron’s smartest move might well be to leave Brown and Cleggl to form a government together. At some point in the next six months, the markets will almost certainly turn on the pound. With a run on the currency, the Labour-Liberal Democrat coalition would collapse, allowing the Conservatives to win an election soon afterwards.

If Cameron does govern alone, he won’t be able to do anything. He ran on a timid manifesto that didn’t lay out the stark choices facing the U.K. It will need cuts to public spending as deep as anything Greece has been forced to implement. Wages will have to fall, livings standards will decline, and retirement ages will have to be stretched into the future. It has caused riots in Athens. There is no reason why it won’t in London or Manchester as well.

Cameron’s minority administration won’t have the strength to make many difficult decisions. Nor will it have the mandate to stand up to the opposition those decisions would provoke.

Stalemate won’t work for Britain. At some point, the country will have to tackle its addiction to debt. It has just postponed that day of reckoning at the cost of making it more painful when it finally arrives.

Posted by Lawrence Auster at May 08, 2010 07:52 PM | Send

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