Looking at the political chaos of the last two months, you might be forgiven for thinking that this sort of instability is endemic in the UK. However, a different perspective would be to look at the political landscape since 1979. There were 18 years of Conservative rule followed by 13 years of Labour rule and so far, 12 years on Conservative dominated rule. Taking the long view and downplaying the distractions of social media and the 24-hour news cycle shows a different perspective. However, the one element which has been common to both major parties is that at the end of their term of office they seem to suffer the political equivalent of a nervous breakdown and leave the field wide open for their opponents.
My theory of political instability is that a party becomes unstable when, where for considerable periods of time, it is required by particular circumstances to carry out policies which instinctively it does not wish to do. This causes long term fissures in both the parliamentary party and the wider membership.
So much of the instability in the Conservative party has been caused by the government pursuing policies which go against Conservative principles such as the control of individuals by the state necessitated by Covid, and heavier taxes to pay for the resultant spending. Whilst these policies can be justified in terms of the need to deal with current crises, they leave a legacy of division and unhappiness amongst those who are required to carry out these policies. The same is true for the Labour party as well.
Since 1979 Conservatives have been largely associated with tax cuts (at least the headline rates), the Labour party with greater public spending and potential tax rises. The Conservatives on occasion have been forced to increase taxes notably 1981, 1993 and 2022. By contrast, in order to get elected in 1997 the Labour party not only gave a tax guarantee for the basic and higher rate of tax but also promised to follow Conservative spending plans for the next two years. Indeed, Labour kept the top rate of tax at the same 40% until one month before they left office. This inevitably caused some difficulties within the Labour party and the resultant leftward shift when they left power in 2010.
The argument made by the Labour left was that the limited scope for tax rises meant that public spending was more constrained than they would have chosen. This led to the manifestos in 2015,2017 and 2019 which offered greater public spending partially funded by higher taxes. None of these manifestos successfully propelled Labour into government. It remains to be seen whether Sir Keir Starmer’s platform at the next election will include substantial tax rises. One by-product of the U-turn on 45p is that it reduces the scope for easy to sell tax rises.
The mini-budget, the subsequent market chaos and the eventual reversal of most of its provisions may eventually bring stability back to the financial markets but may well create similar dissensions within the Conservative party. There was already unease at a 70 year high in terms of tax as a percentage of GDP. This is likely to be accentuated once Jeremy Hunt’s proposals are announced in full. If the economy allows for tax reductions in 2024, this controversy may ease but the precedent of the Major government which raised taxes in 1993 and then subsequently reduced them in 1996 and 1997 is not encouraging.
In other countries where proportional representation makes it easier for a multiplicity of parties to be elected and governments are regularly formed through coalitions, these stresses and strains in policy are played out between parties. In the UK’s first past the post system which rewards larger parties, the controversies are carried out within the parties and therefore appear more dramatic.
Broadly speaking there are two strains of Labour opinion. One which prioritises more balanced budgets and the other which seeks to increase the scope and size of the public sector. Likewise, there are two strands to Conservative thinking; one which stresses the importance of balanced budgets and fiscal restraint, the other which emphasises supply side reforms, reductions in the scope and size of the state and tax cuts. Three of the four strands of thinking have predominated in government over the past nearly 50 years. But paradoxically, the fourth strand of the Labour Left although never endorsed in recent times by the electorate, has enjoyed some traction as taxes and government spending have ascended to record post war heights.
The real challenge for both the Conservative government and any future Labour government is that the demands on public services are not decreasing. As the population ages, it requires more support in terms of health, social care, and social support payments. Other areas such as levelling up, common infrastructure and defence are also requiring more funds. In the past, the only way the governments have been able to satisfy these growing requirements without large tax rises has been through increased growth and productivity. Unless the UK economy rediscovers the ability to grow at a faster pace, tax and public spending will continue to cause instability for years to come.
Rishi Sunak has already said that his number one priority is the economy. It will be a challenge to see any step change in its performance in the two years before a general election is due.
Looking at the political chaos of the last two months, you might be forgiven for thinking that this sort of instability is endemic in the UK. However, a different perspective would be to look at the political landscape since 1979. There were 18 years of Conservative rule followed by 13 years of Labour rule and so far, 12 years on Conservative dominated rule. Taking the long view and downplaying the distractions of social media and the 24-hour news cycle shows a different perspective. However, the one element which has been common to both major parties is that at the end of their term of office they seem to suffer the political equivalent of a nervous breakdown and leave the field wide open for their opponents.
My theory of political instability is that a party becomes unstable when, where for considerable periods of time, it is required by particular circumstances to carry out policies which instinctively it does not wish to do. This causes long term fissures in both the parliamentary party and the wider membership.
So much of the instability in the Conservative party has been caused by the government pursuing policies which go against Conservative principles such as the control of individuals by the state necessitated by Covid, and heavier taxes to pay for the resultant spending. Whilst these policies can be justified in terms of the need to deal with current crises, they leave a legacy of division and unhappiness amongst those who are required to carry out these policies. The same is true for the Labour party as well.
Since 1979 Conservatives have been largely associated with tax cuts (at least the headline rates), the Labour party with greater public spending and potential tax rises. The Conservatives on occasion have been forced to increase taxes notably 1981, 1993 and 2022. By contrast, in order to get elected in 1997 the Labour party not only gave a tax guarantee for the basic and higher rate of tax but also promised to follow Conservative spending plans for the next two years. Indeed, Labour kept the top rate of tax at the same 40% until one month before they left office. This inevitably caused some difficulties within the Labour party and the resultant leftward shift when they left power in 2010.
The argument made by the Labour left was that the limited scope for tax rises meant that public spending was more constrained than they would have chosen. This led to the manifestos in 2015,2017 and 2019 which offered greater public spending partially funded by higher taxes. None of these manifestos successfully propelled Labour into government. It remains to be seen whether Sir Keir Starmer’s platform at the next election will include substantial tax rises. One by-product of the U-turn on 45p is that it reduces the scope for easy to sell tax rises.
The mini-budget, the subsequent market chaos and the eventual reversal of most of its provisions may eventually bring stability back to the financial markets but may well create similar dissensions within the Conservative party. There was already unease at a 70 year high in terms of tax as a percentage of GDP. This is likely to be accentuated once Jeremy Hunt’s proposals are announced in full. If the economy allows for tax reductions in 2024, this controversy may ease but the precedent of the Major government which raised taxes in 1993 and then subsequently reduced them in 1996 and 1997 is not encouraging.
In other countries where proportional representation makes it easier for a multiplicity of parties to be elected and governments are regularly formed through coalitions, these stresses and strains in policy are played out between parties. In the UK’s first past the post system which rewards larger parties, the controversies are carried out within the parties and therefore appear more dramatic.
Broadly speaking there are two strains of Labour opinion. One which prioritises more balanced budgets and the other which seeks to increase the scope and size of the public sector. Likewise, there are two strands to Conservative thinking; one which stresses the importance of balanced budgets and fiscal restraint, the other which emphasises supply side reforms, reductions in the scope and size of the state and tax cuts. Three of the four strands of thinking have predominated in government over the past nearly 50 years. But paradoxically, the fourth strand of the Labour Left although never endorsed in recent times by the electorate, has enjoyed some traction as taxes and government spending have ascended to record post war heights.
The real challenge for both the Conservative government and any future Labour government is that the demands on public services are not decreasing. As the population ages, it requires more support in terms of health, social care, and social support payments. Other areas such as levelling up, common infrastructure and defence are also requiring more funds. In the past, the only way the governments have been able to satisfy these growing requirements without large tax rises has been through increased growth and productivity. Unless the UK economy rediscovers the ability to grow at a faster pace, tax and public spending will continue to cause instability for years to come.
Rishi Sunak has already said that his number one priority is the economy. It will be a challenge to see any step change in its performance in the two years before a general election is due.
