Sunday, 16 May 2010

Cameron Sworn in Prime-Minsiter as Deal Making & Horse Trading Continues

Brit Has Its New Prime Minister-Challenges Ahead 

NewsViews Election Forecast that People will kick out Labour from power has become a reality.  Although Labour Party may have some consolation that no single party got clear majority, the mandate against the Labour Party was loud and clear.  Since the inception of new name in 1996 as 'New Labour' Party's labour base was eroded as it was reduced to a Labour Party only in form as in essence its polices were worst than any right wing government.  

Liberal Democrats after a week of deal making finally reached an accord with conservatives and got its leader Nick Clegg  as Deputy Prime Minister.   This is the country's first coalition since 1945, ending 13 year Labour Party misrule.  This can be characterized as coalition without a common ideology but Lib Dem joined forces with conservatives, we ae told, nation come first. The differences on issues like immigration, Afghan & Iraq war will continue but will not be aired in  cabinet meeting.  While the horse-trading still continues between the members of the new coalition more details of how their fiscal strategies will be merged to form a coherent new tax policy are emerging as follows: (i) increase in threshold on income tax currently from 6,450.00 to 10,000.00, a biggest tax cut seen in decades giving some relief to lower middle class. It reduced government revenue by 17 billion, (ii) Deficit reduction continuing recovery by a significant cut of 6 billion this year in public service spending (Greek reminder ), (iii)  Restore public confidence in economy - Urgent need to assess public spending by an independent auditing of the state of national finances since the deficit forecast has been wrong by 40%, (iv) Create a new office of Budget Responsibility and Treasury to give up its role in economic forecast, (v) in principle an agreement on political reforms, (v) possible imposition of levy on banks, etc.  Some oldguards of Conservatives, like William Hague, Ian Duncan and others have been inducted in the cabinet but surprisingly veteran conservative leader Michael Howard did not make to the list.  There are only 4 women in the cabinet which included an Asian woman, Baroness Warsi.  Opponents already started criticism of coalition cabinet for a weak record of conservatives on equal opportunity.  Labour record on equal opportunity was not that great either except public relations exercise.  Needless to mention its Equality chiefs Gurbux Singh was convicted for threatening a police officer and Trevor Phillips was found trading cash for Racism (http//: & http//, previous issues).   

One thing is clear financial market did not take the coalition and cut in spending very well as pound continues to be weak and FTSE also did not show any sign of recovery.  Labour Party left 161 billion deficit last year i.e., about 11% of GDP, which is the largest in the Developed Countries according to the IMF. Although cuts in deficit was vital such measures are not popular with public when global financial crises is not yer over.  One wonders how the coalition will reduce the deficit while the economy is still in recession. What is known as the 'catch of 22' or Marxists would put it as inner contradiction of capital accumulation.            

1 comment:

T. Krishna Kumar said...

Is it a Coalition or Co-violation?

The two parties have divergent ideologies and hence the question arises how such parties can ever form a coalition and yet keep to their ideologies. One might argue that the ideologies of each party are packaged into a set of stands they take on issues. The two parties may have quite divergent stands on some issues while on some other issues their views are not so divergent. The coalition in such instances would lead to one of two situations: either (i) they ignore the ideological differences and forge ahead with majority decisions in national interest, or (ii) they do not take any decisions on issues on which they have very divergent stands, and take decisions only on issues on which they do not have very divergent views.

First let us assume that in a country with educated and enlightened voters, such as in this case, in order to capture a large vote share parties form their ideologies so that they diverge widely on “major issues of great concern” to a large number of people. Under this assumption any coalition formation under alternative (i) above means that the party is on a suicidal path in the long run. Will any major party take such suicidal path? If the answer is in the negative then the coalition must be of the second kind. If it is of the second kind is it “national interest” not to take any decisions on major issues of great concern to a large number of voters? In either case both parties are bound to violate either the mandate the people had given them or the ideologies of their parties. So is this a coalition or co-violation of ideologies and national mandate?

I see a great parallel in the coalition formations that take place in India and what has taken place in UK recently. While in UK this coalition has been a rare phenomenon that has recurred after 45 years in India this has been happening for nearly four decades. One can learn from Indian experience on how the coalitions actually work. In the state of Karnataka a few years ago two parties, Janata Dal (Secular) a Left of Centre party or JD(S) and Bharatiya Janata Party (BJP), a right wing party formed a coalition government. The agreement for the formation was that JD will have its person as the Chief Minister for the first half of a five year term, while the BJP will have its person as the CM for the latter half. After half of the term is over JD(S) went back on its commitment and called for a dissolution of the government and asked for a midterm poll, assuming that under that threat BJP would allow JD(S) CM to continue. The strategy boomeranged and BJP won with a much better margin in the reelection. It is needless to say that during the JD(S) rule JD(S) policies received major thrust.

Another example is a recent vote on the “cut motion” during the budget debate, a vote in favor of the cut motion could have brought the Manmohan Singh government down. The Singh government survived thanks to its arch rival Mayadevi of Bahujan Samaj Party (BSP) offering its party’s support to Singh’s party. This was done with an implicit understanding that major cases against her would be dropped. From these it is quite obvious that such coalitions are against the “national interests”. Such coalitions are invariably unstable as the terms of coalition formation are non-enforcable, and possibly against "national interest"

What is the political remedy in such situations? Whenever there is a hung parliament there should be a run-off election just between the two major parties by eliminating the others, in which case one of the parties will get the national mandate to govern, or the parliament should convene and elect a “national government” that consists of representatives from the all the parties and also a few independent professionals of repute voted by the entire parliament. At present the constitution of either UK or India does not permit this alternative leading to the present situations that prevail.