By September, we will have a new Prime Minister and possibly a new Labour leader. The new PM will want to gain legitimacy – beyond that of the Conservative party that will elect them – but could also be considering whether they can get away with a snap election before the full economic impact of Brexit will be felt. Gavin Kelly assesses the considerations that would affect the decision to call a general election.
British politics and economics have always been intimately intertwined — but perhaps never quite as directly as they will be this autumn. The real issue facing the economy right now is the scale of uncertainty, which in no small part reflects the political chaos consuming Westminster. The possible timing of political events is not just of interest to Westminster anoraks, it will count in economic terms too.
None of the leading contenders to be the next PM will have a settled plan on a general election at this stage — there is far too much that is up in the air. But they will be starting to weigh some of the different factors. One scenario — probably the central one in most people’s minds right now — is that the sequence of events will be simultaneous leadership elections in both main parties, followed by a general election at some point relatively soon, followed by commencement of Article 50 negotiations.
It is worth saying at the off that this scenario is far from certain and brings with it major risks. Above all, it would require the new PM to know what they want to put to the British public about their preferred terms for a new relationship with the EU. None of the options will be good ones. The scope for a searing sense of betrayal at any ‘mini-Brexit’ proposal — from UKIP, of course, but also many Conservative and Labour Leave supporters — is clear for all to see. And if ducking and weaving rather than answering the big questions (above all on free movement) sounds attractive then bear in mind that the dynamic of a general election is different to that of a referendum. A ‘cake and eat it’ campaign might crumble.
Yet there will also be a strong countervailing temptation to go to the country. A new PM will feel popular pressure to secure a personal mandate (having only been elected by a sub-set of 150,000 Conservative party members) and would like to acquire public legitimacy for their negotiating position. And, as others have pointed out, they may judge that the popular backlash triggered by falling short of expectations on ending free movement could hurt Labour more than their own party. On top of this, the opposition is currently in utter disarray so better, they might think, to act fast.
Let’s assume for now that a new incumbent is inclined to trigger an election: when might this be?
Both the main parties’ leadership elections are likely to be resolved in September. One view, which would probably prevail in ‘normal’ times, is that it would be wise for the new PM to establish themselves as a national leader in the public mind for a few months (think: images of the new PM next to the No 10 podium, rather than hanging from a zip-wire). A settling in period would allow a new top Cabinet team to get established, and for the government to set out its stall in an Autumn Statement.
But these are hardly normal times. If the economic clouds are darkening there may be a real desire to go early before the storm breaks. That raises the question of when, should it arise, any big Brexit- slowdown, never mind a full-blown recession, would be confirmed — and if it’s the latter it will be a major moment in the politics of the next year and a ghastly backdrop for an election campaign. If, say, we dipped into negative growth quarters 3 and 4 of this year, then the first time the ONS would announce a recession would be January 26th 2017 — note it in your diary.
Added to this is the fact that the Autumn Statement is likely to be a bloodbath. It will be dominated by the OBR setting out the structural downgrade for public finances over the medium term (the current ambition of clearing the deficit by 2020 will be shredded — recall that the IFS/NIESR estimate that following Brexit the deficit will be roughly £20bn — £40bn larger than it would have otherwise have been). Alongside this will be new, lower, forecasts for trend growth.
Of course, if the economy really takes a very sharp-turn for the worse over the coming months then the need for an early fiscal event could become overwhelming in order to set out some time-limited fiscal stimulus (permitted under the current rules if growth falls below 1 per cent). In this grim scenario a snap election feels highly unlikely. That said, nearly all the real macro-economic work over the short-term is going to be done by the Bank of England and it’s possible that rather than an immediate shock we experience a bigger hit to the economy through 2017.
What we can say is that the new incumbent to No 10 is very likely to be poring over the data — economic and polling — in early September pondering whether they could get away with holding a snap election after the party conference season. This would be in advance of the full economic impact of Brexit being felt and before they have to level with the public about the fiscal pain to come. We can also say with some confidence that we should discount all the current media briefings on the likely timing of the next election. Anyone with even a fleeting acquaintance with the disastrous 2007 ‘non-election’ saga knows that to hold open the possibility of a snap election on arrival in Downing Street requires a stream of stories suggesting this eventuality is unlikely to happen. Never box yourself in.
As well as these immediate economic pressures there will be other wider considerations. For starters, a snap election will either require Labour MPs to vote for it (to secure 2/3 support in Parliament), or the new government will have to pass a constructive vote of no-confidence in itself, or it will need repeal of the Fixed-term Parliaments Act. The last of these may sound most straightforward politically: after all it only needs a majority of one, but it raises the vexed question of what the Act should be replaced with (more on that another day). Suffice to say that none of these options are risk-free (though if a PM wants an election, he or she will get it).
Then there is the matter of Labour’s leadership. If — a big if — there is a change in leadership, and this generates even a modest post-Corbyn bump in the polls, then that would incline the new PM towards holding off in the hope it passes.
Crucially, there is also a major question as to the scale of diplomatic pressure which the new leader comes under to start the clock on Article 50. The PM will no doubt enter office feeling all this should be done in its own good time. They’ve been told time and again that they can’t be forced into it. But if there are fears that drift in the UK is adding significantly to uncertainty in the global economy; or, say, the EU is convulsed once again by a populist vote against Renzi in October’s Italian referendum, bringing into question the future of the Euro and with it the whole European project, then life will become intensely uncomfortable for a stalling PM. It could be made clear that the terms the UK will get will deteriorate if we don’t get on with it. And there could also be a difficult opening relationship with President Clinton (and, yes, the new PM — whoever it is — would care greatly about that). All this, too, could weigh on the timing and likelihood of any Brexit election.
Finally, and as important as all of the above, is the question of personal psychology. Even if you are a natural risk-taker (and one of the main candidates to be PM is anything but that), and even if your political brain tells you that a snap election is a good idea, it’s still the case that walking through the door of No 10 only to turn around and walk back out again is an incredible wrench. Loss aversion affects politicians just like anyone else: few people spend their whole career dreaming of getting a role only to risk losing it on arrival.
All those clichés about the Prime Ministers having to make ‘tough choices’? This really will be one.
Note: this first appeared on Gavin’s personal blog and is reposted here with permission.
Gavin Kelly is the CEO of the Resolution Trust, and the former Director of the Resolution Foundation. He tweets as @GavinJKelly1.