The curtain has been brought down on 13 years of rule by British prime ministers who claimed adherence to New Labour. The new show in town is the first coalition government that Britain has had since 1974. Symbolically, however, the new Conservative-Liberal Democrat coalition will mark the end of a lengthy period of economic prosperity that allowed Britain to regain its standing as a major global centre for finance, technology and culture. How much of that profile will remain as the painful process of slashing government expenditure and reducing household incomes to bring down the UK’s enormous debt mountain will be the real test for Prime Minister David Cameron’s leadership.
There is little silver lining in the economic legacy that Mr Cameron has inherited. An incipient economic recovery, one that followed a year-and-a-half of contraction, is endangered by a currency crisis across the English Channel. Britain’s budget deficit last year was 11.5 per cent of gross domestic product, just two points behind the danger levels of Greece. Unemployment is at a 15-year high and Britain’s once-proud financial sector is in the doghouse. Under New Labour, Britain became a genuinely globalised nation. Its economy become far more intricately linked with the world’s than it had ever been before. Britons travelled and invested overseas in record numbers. Services replaced industry as the primary source of employment. A cultural flowering was one consequence. But so was a degree of indulgence: a once frugal people now have the highest levels of personal debt in the Western world.
The Cameron coalition has agreed to slash an enormous 6 billion pounds from government expenditure this year to begin the process of rebalancing Britain’s books. This will result in large job losses and a reduction in public services. While the recession of the past two years has helped reduce popular expectations, Mr Cameron can expect some years of deep unpopularity as he drives his country deeper into recession. The problem for him will be that recovery is now far more dependent on events beyond Britain’s borders and beyond his control than it was before. New Labour was about exuberance. It was one reason Tony Blair could smile incessantly. New Coalition politics will be about frugality. Mr Cameron will have to find a different face to sell its prescriptions.