After next year’s General Election, we will reflect back on the last five years, and the overarching memory will be of ‘austerity Britain’. A time of economic crisis that jeopardised the future of the nation and the global economy. The policy climate we have witnessed has largely been constructed and framed in the shadow of the collapse of Lehman Brothers and the resulting financial chaos, whether tackling the UK’s budget deficit or reforming the education system to compete in the ‘global race’.
Political Scientist David Runciman argues that democracies lurch from one crisis to the next, stuck in a repetitive cycle. This frustrating mode of behaviour stems from our inability to look ahead and tackle potential shocks in their early stages. With the UK economy showing signs of vitality, there is reason to believe we are finally emerging from this crisis. If this is the case, what dangers are lurking ahead? And more importantly, what is likely to be the top item on the agenda for the next government up to 2020?
Although the UK economy is showing green shoots of recovery, there are warning signs that a larger full blown crisis is already developing.
Although the UK economy is showing green shoots of recovery, there are warning signs that a larger full blown crisis is already developing. With the housing market showing some bubble-like behaviour, a rise in interest rates from the Bank of England could wreak havoc on over-leveraged home owners. Buyers unable to pay the monthly mortgage will lead to a surge of home repossessions, ultimately resulting in a collapse of house prices. A rise in interest rates would also test the resilience of UK businesses, especially the thousands of so called ‘zombie companies’, who are only surviving due to the low cost of servicing their debts.
Public services could prove a pitfall too, with the NHS under increasing budgetary constraints that has seen the number of NHS Trusts in financial difficulty double in the last year alone. There is also the possibility of unprecedented constitutional crises, with both Scottish independence and a ‘Brexit’ from the EU possible, which would result in protracted national and international re-negotiations. The instability of these separations would cause a devastating economic slump due to uncertainty for investors and financial markets.
On the international stage, some economists still argue a second financial meltdown in the next few years is a distinct possibility, potentially as a result of a sudden catastrophe in the Chinese economy. Economic threats lurk closer to home too, with the Eurozone battling deflationary pressures and alarmingly high youth unemployment. Perhaps even more difficult to predict are the territorial disputes that could ignite anywhere from the Ukrainian border with Russia, the Middle East, or the South China Sea, testing the resolve of international global governance to its limits.
There is no way of knowing how severe future global crises will be, but we do know that strong leadership will be needed to master the events as they unfold. In which case, it must be worrying for Labour that the public strongly doubt Ed Miliband’s ability to face such challenges. According to a recent poll conducted by YouGov, only 4 per cent of people think Miliband performs well in a crisis, compared to 15 per cent for Prime Minister David Cameron. Unfortunately for Miliband, being in opposition makes this a difficult issue to address. Cameron, in contrast, demonstrates his leadership abilities on the international stage by representing the UK, attending summits such as the G20. In this respect, incumbency offers Cameron a significant advantage over the Labour leader. If Cameron is still Prime Minister on 8 May next year, he may have ‘known unknowns’, or even ‘unknown unknowns’ to thank.