U.K. Prime Minister David Cameron swept back into office after a general election that saw his Conservative Party win an unexpected majority in the face of a surge in nationalist support in Scotland.
With Cameron immediately renewing his pledge to hold a referendum on British membership of the European Union, the result throws up questions about Britain’s constitutional future. For now, the surprise victory was welcomed by markets, with stocks and the pound rallying as it became clear Cameron had defied forecasts of a hung parliament to easily defeat Ed Miliband’s Labour Party and govern alone.
“I truly believe we’re on the brink of something special in our country,” Cameron, 48, told reporters outside his 10 Downing Street residence on Friday. “Our manifesto is a manifesto for working people and as a majority government we will be able to deliver all of it.” That includes an “in-out referendum on Europe,” he said.
The result is a vindication of the Tories’ campaign based on their record of producing an economic recovery and cutting a record budget deficit. That same austerity agenda was rejected by the Scottish National Party of Nicola Sturgeon, whose surge reopens doubts over the integrity of the U.K. just eight months after Scots voted “No” to independence.
The premier was meeting with Queen Elizabeth II at Buckingham Palace as the Conservatives reached the 326-seat threshold that allows them to ditch their Liberal Democrat coalition partners and govern alone in the 650-seat Parliament.
With all electoral districts declared, the Conservatives took 331 seats to 232 for Labour, and the Liberal Democrats just eight seats. Miliband and Nick Clegg, 48, the Liberal Democrat deputy prime minister in Cameron’s first term, resigned as leaders of their respective parties before the final results were announced.
Miliband, 45, who called Cameron to congratulate him, said that he assumed “absolute and total responsibility” for Labour’s shock defeat. For the Liberal Democrats, reduced to a rump after losing 49 seats, the result was “immeasurably more crushing and unkind than I could ever have feared,” Clegg told supporters.
Armed with a parliamentary majority, Cameron will be free to pursue his party’s policy platform including reductions in income tax and inheritance tax and the chance for tenants to buy their homes from non-profit housing associations. He’s also planning 30 billion pounds ($46 billion) of fiscal consolidation, with cuts in welfare spending planned.
U.K. stocks, bonds and the pound gained on Friday. The FTSE 100 Index rallied 2 percent, one of the biggest gains among European markets, led by British lenders Lloyds Banking Group Plc and Barclays Plc.
All the same, the pound pared earlier gains as investors considered the prospect of a referendum on Europe. The in-out vote “increases uncertainty over the economic outlook for the U.K.,” said Greg Gibbs, a Singapore-based strategist at Royal Bank of Scotland Group Plc.
“The debate over EU membership is likely to come up pretty quickly and could prove a significant distraction for business and government,” he said.
Cameron was swift to form his new cabinet, re-appointing Chancellor of the Exchequer George Osborne, Home Secretary Theresa May and Foreign Secretary Philip Hammond.
Osborne, one of the architects of the campaign, begins his sixth year at the Treasury with a mandate to step up his budget-cutting strategy and prepare for a referendum. Announcing the appointment on Twitter, Cameron said Osborne will be first secretary of state, the highest-ranking minister after the prime minister.
Aside from the surprise scale of the Conservative victory, the deepest political tremors were felt in Scotland, where the SNP took 56 of the country’s 59 seats. In doing so, it swept out all but one of Labour’s 41 lawmakers, eradicating the party’s half-century domination north of the border and threatening fresh confrontation between Edinburgh and London.
Cameron reached out to Scotland, saying his Conservatives would govern as a “party of one nation, one United Kingdom.” He said he’d meet his pledge to devolve more powers, while also ensuring “fairness” for England.
In England, London Mayor Boris Johnson won a seat in the Commons, keeping alive speculation over a possible bid to succeed Cameron as Conservative leader at some point. Nigel Farage said he’ll step down as leader of the anti-EU U.K. Independence Party after he failed to win election, leaving the party that had polled at as high as 18 percent in January with just one lawmaker.
Labour’s finance spokesman Ed Balls led a list of high profile casualties that included the party’s foreign affairs spokesman and election strategist Douglas Alexander -- beaten by a 20-year-old student -- and Jim Murphy, leader of the Scottish Labour Party.
Among the Liberal Democrat losses were Business Secretary Vince Cable, Energy Secretary Ed Davey, Chief Secretary to the Treasury Danny Alexander, business minister Jo Swinson and former leader Charles Kennedy.
“While Cameron has had a great night, I suspect his problems in some way have only just begun,” Tim Bale, professor of politics at Queen Mary University in London, said in an interview. “It’s a very tight majority which means he will have to make promises to people and do things to people to keep them on board on Europe.”