Monday, 4 May 2015

The Fantasy Politics of The Tories and SNP

Both the Tories and the SNP have a shared interest in putting forward a political scenario that is a total fantasy. It is that a future Labour government will have to have some kind of deal with the SNP. Not only is no such deal even likely, but it would be disastrous for Labour to contemplate, as indeed would be any kind of deal between Labour, and whatever is left of the Liberals. A look at the reality of the parliamentary mathematics shows why no such deal is required.

The Tories keep going on about only needing another 23 seats. But, the fact is that the Tories will end up with fewer seats, after the election, not more! They have essentially given up hope of a majority, which is why their electoral strategy has become wholly centred around trying to retain their core support, and, if possible, winning back the support of Ukippers. Its an indication of just how electorally time limited the Tories are. Their demographic is now comprised of a group of narrow minded, comfortably off, old biddies, who are literally dying off.

Where the Tories do win seats, it will be in places like the South-West, where they will win votes from their Liberal allies, as the Liberals themselves disappear up their own backside, having committed hari-kiri, by showing their true colours in supporting one of the most right-wing Tory governments there has been. The Liberals laughably talk about occupying a centre position between Labour and the Tories. They don't seem to realise that, with Ed Miliband hardly being seen even as another Harold Wilson, let alone a Clem Attlee, for the Liberals to place themselves to the right of Labour, shows just how far to the Right the Liberals are! But, in that case, why vote for the pathetic Liberals, when you could vote for the real thing by voting Tory?

With the Tories losing seats, and with their Liberal partners losing even more seats, the chances of another Liberal-Tory government is out of the question, however much Nick Clegg might pray for it to save his skin. Moreover, its unlikely that the Tories natural allies amongst the Ulster Unionists will win enough seats to put them in office. So, the parliamentary maths means that Cameron cannot put together a majority.

Constitutionally, if no party has a majority, Cameron can stay in Downing Street, until a potential government is put together. If Cameron and the Tories have the largest number of seats – which is still not likely, because the opinion polls suggest Labour and Tories are neck and neck, and the arrangement of boundaries gives Labour an advantage, besides which Labour just has more troops on the ground to get the vote out in the marginal seats – then Cameron could attempt to put forward a Queen's Speech, but it would be voted down by all the opposition parties, given that he would have no majority.

The reality, is then that he would not be able to form a government, even before he started. Even if he did by some fluke get past that hurdle, he would lead an incredibly weak government, because the DUP have said, for example, that they would demand an end to the bedroom tax, and the Liberals would almost certainly have to oppose an EU referendum, which would cause a back bench rebellion in Tory ranks, bringing Boris Johnson to power. Such a government even if it got started would fall within a matter of weeks, and under the provisions of the Fixed Term Parliaments Act, that would mean that Labour would have to be invited to form a government.

But, the situation facing a minority Labour government would be completely different to that facing a minority Tory government. Labour would draw up its Queen's Speech based upon its manifesto commitments. Despite all of the fantasies put forward by the Tories and the SNP, it would have absolutely no reason to have any discussions, let alone negotiations with the SNP or anyone else, in doing so. As I suggested some months ago, and as Roy Hattersley has suggested recently, Labour would put forward its Queen's Speech, and simply dare the other parties to vote it down.

That is a completely different situation to that facing a Minority Tory government. Labour would be expected automatically to vote down a Tory Queen's Speech, just as the Tories would be expected to vote against a Labour Queen's Speech, but the difference lies with the cleft stick in which the SNP would find itself. The SNP would have to join Labour in voting down a Tory Queen's Speech, or face wipe out in Scotland, but for the same reason, if it voted with the Tories to oppose a Labour Queen's Speech, it would equally face wipe out in Scotland. Remember, this is the same SNP that voted against Labour in 1979, and brought Thatcher to power. It would not live to do that twice.

That is why, whenever, SNP spokespeople are asked if they would vote down a Labour Queen's Speech, even if it contained measures they opposed, they hum and arrh, and avoid answering the question. The truth is that the SNP are holding a gun that only contains blanks. No matter how much the SNP bluff and bluster, no matter how much of Labour's Queen Speech they oppose, the truth is that they will have to vote for it, and put Labour in government, without anything being given in return.

And the same is true for all of the measures that a Labour minority government might then put forward. Labour has no reason to talk to the SNP, other than to give them a polite time of day in passing them by in the corridors. On many issues Labour would not even need votes from others to pass its legislation, and although the SNP might put forward amendments to Labour measures, they are unlikely to be able to win a majority for those amendments, so the Labour proposals will pass anyway. But, with the Fixed Term Parliaments Act, the hands of the SNP are tied even more. Under the act, even important votes are no longer necessarily votes of confidence.

If Labour were to lose such an important vote, it would simply trigger an actual confidence vote, for which the SNP would have to vote rather than bring down the Labour government, and put the Tories in office.

The Tories and the SNP are living in a fantasy land, driven by their shared conservative nationalist ideology and joint interests, designed to obscure the reality that Labour will be the next government of Britain, and they need no deals with the SNP or anyone else.


davidjc said...

Totally agree. One glitch might be the Blairites, who've already piped up to side with minority Tories. Even a small group of them could hold a loaded gun to Ed's head - we'll vote with Tories for the good old national interest if you don't speed up deficit reduction etc.

Boffy said...


They'd have to vote for a Tory Queen's Speech for that to be effective. I doubt that would happen as a "rebellion". It appears the new intake might be to the Left of the old PLP, and to sabotage the potential for defeating the Tories and getting a Labour government, would make life very uncomfortable for them with the CLP's etc.

If A Tory QS falls and Labour gets its QS through, the Blairites will be hamstrung. Personally, looking at the economic stats, including what the IFS says, (Paul Mason has also pointed this out) provided there is only a reasonable level of growth, there is no need for Labour to actual pursue any further cuts, and the deficit would disappear by the end of the Parliament.

I expect growth to pick up in the second half of 2015, as part of the 3 year cycle, and with the damaging effects of austerity removed - I also expect austerity will get removed in the EU too, alongside ECB QE - then growth will pick up.

I also expect, as I've written previously that the interest rate cycle has turned up. The new Bond King also believes as I've argued previously that the global long run interest rate cycle bottomed in 2012.

Look at the German Bund Yields over the last week, which have risen 6 fold, despite QE. For the reasons I set out a few weeks ago, I think QE may have been causing consumer price deflation as the flip side of asset price hyper inflation.

If interest rates have turned, then asset prices will crash - because bubbles never deflate slowly. In that case, potential money-capital will begin to get diverted from speculation to productive investment - there have been quite few voices saying that's necessary in the last few weeks from Larry Fink to Warren Buffett. Even money-capitalists get the message eventually that their interest payments and capital gains are not sustainable without actual profits, and profits are not possible without productive investment.

In that case, as I set out in my book, I see a huge financial crash, but with a powerful global economic boom arising out of its ashes. The test for Miliband and other social democrats will be the extent to which they allow the banks to fail before taking over the remnants - I'd prefer their workers to take them over - rather than stepping in to save them.

Under the conditions of the next financial crash, they may have no possibility to save the banks, as they will have their work cut out just protecting the deposits of small savers!

davidjc said...

The boss of Aberdeen Asset Management was saying something along the lines of "even money capitalists are getting the message" on the radio this morning.

Also, that point about the link between QE and consumer deflation was one of those moments when I went, how can I not have seen this before?! Not sure whether to thank you for that or not.

Boffy said...


The interesting thing is not just the number of money capitalists recognising that - Marx was right, of course, that objective laws ultimately will have their way - but that for similar reasons states will also have to be investing money. The state of infrastructure in the Us is well known - I saw something the other day about the amount of investment in track etc that is being undertaken by Buffett in his railway investments - but in Germany, their Internet infrastructure is crap, but also I've seen reports that their highways need loads of investment for repairs etc. too.

I'm not sure whether oil has bottommed, from the reports I've seen output continues to expand. There was an interesting presentation yesterday by David Einhorn about the frackers showing that many are producing at a loss when all costs are taken into consideration, but as I pointed out a while ago, that involves taking into consideration sunk capital investment costs. If you only take current production costs, I'm not sure that is the case, in which case it comes down to whether the firm has borrowed via the junk bond market to finance that original investment, and still needs to cover its repayments from revenues.

There has been a rise in oil demand - in fact there has been a rise in many commodities suggesting the global economy may be stronger than is suggested and gearing up for another surge. There could still be a very short term spike down in the oil price to clear out excess supply, but I expect prices to begin to move back to around $70-80 by next year, and stabilise around that level.

That means along with the other factors I've described before - rising costs and and currency in China - that there will be pressure on consumer prices. If the interest rate cycle has bottomed, and these other factors lead towards sharply rising costs, along with increased productive investment, there could be a whip-saw with a massive financial crash, and a sharp rise in inflation, causing a need for an even sharper money contraction to bring it under control.

I think the deflation argument I made is valid, but I don't think deflation is actually a long term phenomenon.