Originally published May 2015.
Well what a depressing result that was. It is of little consolation but I called the result almost exactly back in March 2013 - http://theviewfromstalbans.blogspot.co.uk/2013/02/the-2015-general-election-is-far-from.html - I should have had the confidence of my own predictions to back it with money. Even Nate Silver got it wrong this time. What an opportunity missed!
So what of the future? We now have 2 years of uncertainty while the Tory party debates with itself over our future relationship with Europe; Labour's position is clear, as is that of the SNP, the Greens, the rump of Lib-Dems and of UKIP - it is only the Tory party that doesn't yet know where it stands on this key issue. In 2017 we could face the situation where the UK as a whole votes to leave the EU while Scotland wishes to remain in; that will be the final nail in the coffin for the Union - as the SNP will certainly demand another referendum at that point.
I see two major issues on the economic front - the first being the UK's continuing productivity puzzle and the second the build-up of private debt. Since 2010 wages have stagnated, though they are starting to rise again now, but our GDP per capita has not improved - our productivity is still awful (we are still behind France on this score). This harms our exports which is partly why we currently have the worst trade deficit ever recorded. This needs to be addressed by investment in infrastructure and by improved education and training to up-skill the workforce; the alternative is a low-wage economy which continues to drive wages down. But given that pressure on pay is now upwards, our productivity and exports may just get worse. Osborne needs to do what Labour proposed which is to allow himself to borrow for investment where the investment can be shown to have a positive impact on productivity; unfortunately this has been ruled out so he would need to break an election pledge to do this - but seeing as the Tories happily abandoned pledges made in 2010 when it suited them (no increases in VAT, no top-down NHS reorganisations, eliminating the deficit, reducing the debt, reducing immigration, rebalancing the economy, etc), I look forward to seeing Osborne wriggle his way out of this one too.
However, a bigger issue is the nature of the current 'recovery'. Thus far it has been driven by consumption paid for by a build up of private debt - the UK has the largest private-debt-to-GDP ratio on the planet, bar Japan. It is now back to pre-crisis levels. When interest rates start to rise this debt will become unaffordable and we will start to see defaults - just as we did in 2007-8. House prices will fall and the Banks' balance sheets will be impacted - we may we well see bank failures and the need for bailouts once again. The situation may be made worse by an additional surge of unsustainable pseudo-growth fuelled by people bringing forward their pension savings spending and a subsequent collapse in demand further down the line. We'll know whether this has been the case in a few years' time.
Another concern is for the future of the NHS. There is a financial crisis building, with 98 trusts thought to be close to insolvency. I fear that the Tories will use this as an excuse to privatise large parts of the service to reward the healthcare firms that have helped to bankroll their election campaign. This will be a disaster for the future of the service as study after study has shown that outsourcing to the private sector consistently provides worse value for money. Numerous studies show that our NHS as currently constituted is one of the most efficient and best value for money in the world. Outsourcing will therefore lead to less money begin available for front-line services, but on this point the Tories' policy decisions are likely to be ideologically-driven rather than evidence-based - a large proportion of the party has long wanted to privatise the health service in the name of shrinking the state. I fear for the future of our NHS.
Well what a depressing result that was. It is of little consolation but I called the result almost exactly back in March 2013 - http://theviewfromstalbans.blogspot.co.uk/2013/02/the-2015-general-election-is-far-from.html - I should have had the confidence of my own predictions to back it with money. Even Nate Silver got it wrong this time. What an opportunity missed!
So what of the future? We now have 2 years of uncertainty while the Tory party debates with itself over our future relationship with Europe; Labour's position is clear, as is that of the SNP, the Greens, the rump of Lib-Dems and of UKIP - it is only the Tory party that doesn't yet know where it stands on this key issue. In 2017 we could face the situation where the UK as a whole votes to leave the EU while Scotland wishes to remain in; that will be the final nail in the coffin for the Union - as the SNP will certainly demand another referendum at that point.
I see two major issues on the economic front - the first being the UK's continuing productivity puzzle and the second the build-up of private debt. Since 2010 wages have stagnated, though they are starting to rise again now, but our GDP per capita has not improved - our productivity is still awful (we are still behind France on this score). This harms our exports which is partly why we currently have the worst trade deficit ever recorded. This needs to be addressed by investment in infrastructure and by improved education and training to up-skill the workforce; the alternative is a low-wage economy which continues to drive wages down. But given that pressure on pay is now upwards, our productivity and exports may just get worse. Osborne needs to do what Labour proposed which is to allow himself to borrow for investment where the investment can be shown to have a positive impact on productivity; unfortunately this has been ruled out so he would need to break an election pledge to do this - but seeing as the Tories happily abandoned pledges made in 2010 when it suited them (no increases in VAT, no top-down NHS reorganisations, eliminating the deficit, reducing the debt, reducing immigration, rebalancing the economy, etc), I look forward to seeing Osborne wriggle his way out of this one too.
However, a bigger issue is the nature of the current 'recovery'. Thus far it has been driven by consumption paid for by a build up of private debt - the UK has the largest private-debt-to-GDP ratio on the planet, bar Japan. It is now back to pre-crisis levels. When interest rates start to rise this debt will become unaffordable and we will start to see defaults - just as we did in 2007-8. House prices will fall and the Banks' balance sheets will be impacted - we may we well see bank failures and the need for bailouts once again. The situation may be made worse by an additional surge of unsustainable pseudo-growth fuelled by people bringing forward their pension savings spending and a subsequent collapse in demand further down the line. We'll know whether this has been the case in a few years' time.
Another concern is for the future of the NHS. There is a financial crisis building, with 98 trusts thought to be close to insolvency. I fear that the Tories will use this as an excuse to privatise large parts of the service to reward the healthcare firms that have helped to bankroll their election campaign. This will be a disaster for the future of the service as study after study has shown that outsourcing to the private sector consistently provides worse value for money. Numerous studies show that our NHS as currently constituted is one of the most efficient and best value for money in the world. Outsourcing will therefore lead to less money begin available for front-line services, but on this point the Tories' policy decisions are likely to be ideologically-driven rather than evidence-based - a large proportion of the party has long wanted to privatise the health service in the name of shrinking the state. I fear for the future of our NHS.
So the banks and hedge funds got the government they wanted but I look forward to seeing how the Government now attempts to square the circle of their contradictory electoral pledges - slashing welfare while protecting the vulnerable, child benefit and pensions, achieving a budget surplus while cutting taxes, cutting immigration while remaining in the EU, growing the economy without immigration and without investment to boost productivity, keeping Britain open for business and investment with one foot in the door out of Europe - the list goes on and on. There'll be plenty to write about.