UK elections, global lessons

The UK election is being held Thursday and the overhanging issue of Brexit is making this battle between Conservative Tories and the Labour Party enthralling viewing. The election specifics are all about Britain, but the issues dividing the UK for the last three years have much wider resonance.

When David Cameron announced in 2015 that he would hold a referendum on whether the UK should stay in the European Union, he was hoping to win a clear majority for Remain and resolve the EU issue once and for all. However, the referendum brought out into the open some stark divisions in British society. Like elsewhere in the world, many of the British people felt disenchanted with the establishment and elites, excluded from the benefits they felt they had been promised from globalisation, and worried about immigration. The Referendum also revealed that the country was split between rural and urban, by age, and by education levels. Almost everyone was, for some reason, frustrated by their circumstances. The vote on EU membership was seen by many British – as Nigel Farage, the only leader not supporting Remain, put it – as an opportunity to send a clear message to elites they were not satisfied with the status quo.

Unable to secure support for remaining in the EU, Cameron resigned, replaced by Theresa May, who struggled valiantly through two years of gridlock to negotiate a Brexit deal, but was ultimately defeated. Enter current Prime Minister Boris Johnson, who has negotiated a deal, largely by replacing the Northern Ireland backstop with alternative measures to avoid customs infrastructure on the Irish border, but in doing so has alienated the Democratic Unionist Party who helped maintain the Conservative majority. A dizzying series of extensions, votes, resignations and floor-crossings eventually led to a Brexit deadline of January 31 2020, and the election to be held this week.

The chasm that the referendum on EU membership opened remains wide – recent polling shows that the British people are still more or less evenly split over Brexit, an “agonising and destructive” state of affairs for the country. Both major parties recognise the deep divide and discontent in the country, and are making big promises to combat it. PM Johnson is changing tack from over a decade of Conservative austerity and traditional policy to increase social spending for pensions, police, health, and education. He has abandoned his previous pledge to cut the corporate tax rate from 19% to 17%. The policies have been costed at 2.9 billion pounds (AUD 5.7 billion). All of these policies are contentious for a party which traditionally stands for small state, free markets, and limited regulation.

The Labour Party under Jeremy Corbyn is emphasising the agenda it set out in its Manifesto of 2017, ‘For the Many, not the Few’. Mr Corbyn has unveiled dramatic plans for the biggest increase in tax and spending in over 50 years. The party aims to provide free broadband, a 5% public sector pay rise, substantial increases in public housing, nationalising rail, water and mail, significantly increasing social and physical infrastructure investment, including health and education, and providing 1 million new jobs via a green industrial revolution.

The plan has been estimated to cost 83 billion pounds (AUD157 billion). Revenue raising would come from a rise in corporation tax from 19% to 26%, a windfall tax on oil and gas companies based on their contribution to climate change since 1996, and an increase to income tax for those earning more than GBP 80,000. Capital gains and dividend taxes would be brought into line with income tax rates, and inheritance tax cuts introduced since 2010 would be reversed. There would be no increase to the VAT. On Brexit, Labour has committed to renegotiating a deal, and putting that deal to a referendum, posited against a clear ‘remain’ option.

The conundrum both parties now face is that the electorate has been polarised along Brexit lines about what it sees would be best for the country, but this split does not necessarily align with the traditional left-right divide between the parties. For example, intergenerational differences mean that while many younger Labour supporters may vote for Mr Corbyn because they support his social agenda and they want to rewind Brexit, many older Labour supporters – like Mr Corbyn himself – are more Eurosceptic. Likewise, younger Conservatives want to remain in the EU, or at least have a soft exit, but do not support the Labour agenda. For many British voters, the Brexit issue combined with quite radical agendas for both parties, means that their vote must come down to what they see as the lesser of two evils for the country.

This elections is at once unique to the UK and reflective of the geopolitical trends sweeping the world. We should all be watching carefully.

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