UK Conservative Victory Portends Deregulation

May 8, 2015Political Economyby EW News Desk Team

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A decisive victory by the Conservative Party in Great Britain may portend greater cost cutting to social services and lower corporate taxes for the UK.

While the Conservatives gained a majority with over 327 seats, the Liberal Democrats suffered a fall from grace as they lost about 30 seats in the House of Parliament. The Labour Party, with over 230 seats, will be the second largest party and the opposition to the Conservatives, but they will also have to contend with the Scottish National Party, whose representation in the Parliament surged to at least 56 seats.

Scottish Challenge

David Cameron, who has been prime minister of the UK since 2010, declared aggressively a number of victories during a tumultuous period in British history. Most recently, Cameron faced a Scottish vote for independence that nearly split up the United Kingdom. Despite keeping the union intact, a surge of support for the Scottish National Party, which spearheaded the secession movement, means that they will be the third largest party in the House of Parliament.

Some analysts believe this move indicates Scotland’s uncertainty in remaining in the union, with a secession only a matter of time; others point to frustration with the two-party dominated system in the UK, in which Conservatives and Labor have failed to provide sustainable economic growth for the country as a whole.

Austerity and Growth

Cameron has also become notorious amongst economists for his aggressive adoption of pro-growth austerity, which Keynesians see as a paradox and a headwind to the UK.

Cameron claims austerity, tax-cutting, deregulation, and pro-business policies have brought Britain back on the path to growth after the 2009 recession. Critics argue that a cyclical recovery was inevitable regardless of Cameron’s actions, and growth has averaged 2% annualized since the beginning of 2013, far below the average. However, economic recoveries should show a growth rate above the average.

Lower Living Standards, Higher Popularity

Additionally, critics argue the net national disposable income per head has fallen since 2008 and failed to recover, being lower in 2014 than it was in 2011, even as GDP per capita has risen to pre-crisis levels. Critics also point to zero hour contracts, in which employees are required to remain on call but may not actually receive paid work during a workday, and a higher cost of living driven by spiraling housing prices as indicators that Conservative policies are failing most British people.

Despite these criticisms, popular opinion has swayed towards the Conservatives, especially on economic matters. In a 2015 YouGov poll, Labor saw a large loss in support on economic issues—with the Conservatives leading by 18 points versus Labor on the economy. The Conservatives have made an aggressive campaign stating that not only have they saved the economy, but that a profligate Labor party will raise taxes and spend the revenue on wasteful and unnecessary social services.

At the same time, Conservatives lost favor on every other issue since they came into power, including housing, the National Health Service, welfare, law and order, and immigration.