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U.K. Election May Add Hamstrung Government to Economy in Crisis

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April 30 (Bloomberg) -- When British Prime Minister Gordon Brown called an election for May 6, most pundits expected a traditional two-horse race between the Conservative and Labour parties, with David Cameron’s Tories snatching a narrow victory in the final lap. They certainly didn’t expect Liberal Democrat leader Nick Clegg to crash the party and deny victory to either of his more established rivals-potentially even taking the main prize for himself.

Outside Britain, many will ask, Nick who? The Liberal whats? Even people in the U.K. don’t really know them, Bloomberg Businessweek reports in its May 3 edition. Clegg leads Britain’s third party, the successor to the old Liberals, the dominant center-left party before World War I. Ever since they were eclipsed by the trade-union dominated Labour Party, the Liberal Democrats have been a marginal, eccentric feature of British life. The collection of vegans, environmentalists, and single-issue cranks picked up a few protest votes. But there was about as much chance of Prince Charles trying his hand at rap as there was of the Liberal Democrats actually forming a government.

That changed with Britain’s first-ever televised debates by party leaders. The Conservatives and Labour both hired experienced debate specialists from Obama’s campaign: Cameron got former White House communications director Anita Dunn, while Brown worked with debate coach Joel Benenson. It didn’t do them much good. While the other two seemed like B-movie actors on a bad day, Clegg was natural and fresh.

‘Bigoted Woman’

The Lib Dems, as they are called, surged in the polls. The Conservatives still have a narrow lead, with some 34 percent, but Clegg’s party is scoring around 30 percent, and Labour has been pushed into third place, at 28 percent. After Brown on Apr. 28 was overheard calling a long-time Labour supporter a “bigoted woman,” his popularity could fall even further. A win, though, wouldn’t make Clegg prime minister because it will be tough for his party to win a majority of the seats in Parliament. The top vote winner in each electoral district gets the seat, and most districts lean strongly toward either Labour or the Tories, while the Lib Dems’ support is more diffuse.

But if the vote ends in a hung Parliament, with no single party in the majority, it will be Clegg who decides whether the keys to 10 Downing St. go to Brown or Cameron -- and he will demand a high price for his support. At the very least, Clegg will want a reform of the voting system so next time around the Liberal Democrats have a chance of making a permanent breakthrough.

Clegg Party

How to explain Clegg’s rise? And what does it mean for the battered British economy? Britain has finally caught up with American-style, TV-driven politics. Just as Tony Blair’s “New Labour” was little more than a vehicle for what was really the Blair Party, the Lib Dems are a front for the Clegg Party. In media-driven politics, an engaging personality who connects with ordinary people can come out of nowhere. Obama did it. Now Clegg is doing it.

And he has picked up on a nervous, volatile national mood. The economic model that served Britain for the past two decades looks broken. The credit crunch nearly took down the banking system. The deficit has risen to around 12 percent of gross domestic product, almost as high as Greece’s. Unsustainable consumer borrowing has been replaced with unsustainable government borrowing. Scandals over parliamentary expenses and ire over the U.K.’s involvement in the Iraq war despite overwhelming public opposition have left the British in an angry mood. Disillusioned with their political and business elite, voters are ready to lash out at the Establishment. Clegg is the frying pan in a vicious domestic row: something you can hit everyone on the head with.

Superficial Change

Yet Clegg offers little more than superficial change. Coming from a wealthy family, the Cambridge-educated Clegg is a bona-fide member of the political elite. A former European Union staffer and lobbyist, Clegg is no more a break with the past than either of his rivals -- but he still comes off as an outsider. And the Lib Dems have been so far from power for so long-and their surge in the polls so unexpected-that they haven’t had time to think hard about what they might do if they actually won. Their policies seem to be either imitations of the other parties’ or hastily cobbled together. The party proposed a “mansion tax” on properties worth more than 1 million pounds ($1.52 million), but Clegg quickly raised it to 2 million pounds when he realized it might cost him votes in leafy London suburbs. And the Institute for Fiscal Studies, a centrist think tank, calls the Lib Dem pension reform plan “fundamentally misguided.”

Weak Government

With the vote split three ways, there are many possible outcomes. A Cameron-Clegg coalition? A Lib-Lab pact, with a new Labour leader? A minority Conservative government? It might be days before the answer emerges. Britain already had a weak economy. Taxes are high, the public sector is bankrupt, and the country needs to face up to a long period of austerity before it can get back on track. Next week British voters are likely to add a weak government to the mix -- at precisely the moment the country needs strong leadership with clear support and a plan to nurse the economy back to health.

To contact the writer of this article: Matthew Lynn in London at

To contact the editor responsible for this article: Paula Dwyer at

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