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7/21/2019 After Victory, the Deluge
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Aftervictory,the deluge
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As a result of the election,both the private and publicsectors can expect a markedly
different path from the previouscoalition government.
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After victory, the delugeAndrew MacDougallSenior Executive Consultant
To succeed in his second term, Cameron must solve two
existential questions: Europe and Scotland
The passage of time has done little to dampen the shock
of the May 7 election result. Despite months of pollingpredicting a hung Parliament and attendant political
and market instability, the people of the United Kingdom
instead returned Prime Minister David Cameron to
Number 10 Downing Street to helm the first majority
Conservative government in 18 years. As a result, both
the private and public sectors can expect a markedly
different path from the previous coalition government.
If the stock markets reaction is any indication, the private
sector is indeed pleased with Camerons re-election.
Then again, the markets might instead be reflecting
relief at what is not to come. There will no return of the50p band; there will be no mansion tax; non-dom
status will not be abolished; and the government willnot be injecting controls into the transport, housing,
or financial markets. These policies crashed out of the
realm of possibility the moment Labour was crushed
in the exit poll.
Conservatives
331
SNP
56
Green
1
232
Labour
8
Lib Dem
1
UKIP
21
Others
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While Cameron is free to march on, the opposition
parties are in disarray, with Labour facing a bruising
leadership contest and the Liberal Democrats struggling
to pick up the pieces following their complete electoral
dismantling. One leader who appears to have escaped
the chop, however, is UKIPs Nigel Farage who, despite
following through on his pledge to resign following his
loss in South Thanet, has re-emerged as leader afterthe party rejected his resignation (albeit with Farage
lordingover them in the room).
Armed with a majority, David Cameron now has the
luxury of ignoring his political opponents; if he keeps
his side united he will control the legislative agenda.And thanks to the surprisingly strong result,
Camerons standing has never been as high withinhis own party. Indeed, Bill Cash, a long-serving MP
and notorious Cameron-sceptic led the cheers as
the caucus re-convened after the election. To succeed
in his second term, however, David Cameron must
do a much better job of managing his troops now
that he has lost the buffer coalition government.
He simply cant afford to get his caucus management
wrong. Indeed, Camerons success rides on thesupport of a group of backbench MPs in whom he
took little interest over the past five years. To succeed,
particularly on the vexing question of what to do aboutEurope, Cameron must first tend to his own garden.
First on the list of gardening tasks: appoint gardeners
to tend to his crop of new policies.
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Appointing a team that unites the party
With his opposition turning inward, Prime Minister
Cameron is reaching out to cement his position both
within his party and the country. A quick start on hisagenda will put his opponents on the back foot while
building support from voters tired of political talk. To
with, the engine of government is already in gear: a new
cabinet has been appointed and a new Queens Speech
outlining the governments agenda is being drafted.
To please his backbench Cameron is sure to include
in that speech new counter-terrorism proposals, tougher
online surveillance powers (the so-called Snoopers
Charter), provisions for jobs including plans to create
3 million apprenticeships and plans to scrap the
EU-flavoured Human Rights Act so that it can bereplaced by a UK version. One area where Cameron
wont be able to quickly please his supporters is
immigration, a sore spot further irritated by this weeksBank of England figures which suggest that immigrants
are placing downward pressure on British wages.
Cameron has returned key figures to marquee posts
to implement his agenda: George Osborne remainsChancellor of the Exchequer; Theresa May remainsHome Secretary; Philip Hammond will again handle
foreign affairs; and Michael Fallon retains his post as
Defence Secretary. There is also continuity in other key
departments: Jeremy Hunt once again leads at health;
Iain Duncan Smith at the Department of Work and
Pensions; and Nicky Morgan returns to Education.
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Of course, with every Cabinet appointment made,there are dozens of MPs who are angry to have
been overlooked.
To help mitigate some of this disappointment theprime minister has also put old faces into new places
and brought fresh blood into his Cabinet. Leading
the former category is Sajid Javid, the former banker
turned culture secretary, who now heads the Business,
Skills and Innovation department vacated by defeated
Liberal Democrat Vince Cable. Javids top priority
will be to develop policies that will reverse Britains
woeful slide on productivity. His replacement at the
Department of Culture, Media, and Sport is veteranMP John Whittingdale, a standard bearer for the
Thatcherite right and Vice Chairman of the all-important 1922 Committee of backbench Conservative
MPs. This is an appointment that will be well received
by Camerons Conservative critics. Whittingdales top
task will be to address the long-term viability of the
much loved (or hated) British Broadcasting Corporation
(BBC). A new face in a new role with a big assignment
is Greg Clark, who as Secretary of State for
Communities and Local Government will have theunenviable job of tackling Britains housing problems.
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To round out the team the prime minister has
appointed a slew of newer MPs into junior roles along
with resurrecting some members who had earlier
resigned or been demoted: Mark Harper returns to
Cabinet as Chief Whip; Alistair Burt is now a junior
minister at Health; and, most importantly, Michael
Gove is back on the front bench at Justice, where he
will oversee the replacement of the Human Rights Act(a long-standing Tory pet peeve).
To round out the list of key players, Mr. Cameron has
even found a place in his political cabinet for putative
leadership rival Boris Johnson, the current mayor of
London and now Member of Parliament for Uxbridgeand South Ruislip. While not bound by Cabinet
solidarity, bringing Johnson close gives the primeminister a modicum of control over a proven wildcard.
Now that he has his team, Cameron must now get onwith business. Having ruled out a third run for prime
minister, he must deliver key manifesto policies before
succession talk overtakes his final term.
Here, the sequence of implementation will be as
important as the speed; the government knows thatthe elephantine shapes of Scotland and Europe could
soon be squashing whatever long-term legislative
agenda it has planned. Of the two, it is the latter which
looms larger, and the prime minister will need some
quick wins to buck up his backbench ahead of a
bruising battle over Europe. And one of those early
wins could involve Scotland.
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A thistle in the governments side
David Cameron was quick too quick to turn
last years Scottish referendum and the debate about
devolution into a plan to offer English votes for Englishlaws. While immensely popular with his party, it
appeared to put party before country. Now there is
a second chance to get it right. Despite Scotland
sending 56 SNP MPs to Westminster, the Caledonian
contingent will exert little to no influence on the formal
parliamentary agenda. The SNP will get what the
government proposes on devolution, and no more.
There is even an opportunity for the Conservative
government to give Nicola Sturgeon more than what
shes asking for. The plunge in oil prices has punched
a hypothetical hole in an independent Scotlandsfinances and transferring taxation responsibilities
to the Scottish government (i.e. full fiscal autonomy)would put them on the hook for the tax hikes needed
to fund their social programs. The SNP would
undoubtedly protest this sudden responsibility, giving
Prime Minister Cameron the opportunity to put the
wily SNP on the back foot. David Mundell, the new
Secretary of State for Scotland, has poured cold wateron that suggestion for now, but it remains a more
radical option available for deployment in the future.
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In the meantime, passing the proposals in Lord Smith
of Kelvins commission report should apply some
balm over the rough patches in the fabric of the
United Kingdom.
No matter the tactics, it is clear Britain will need to
have an adult conversation about finding a new, more
equitable constitutional arrangement. In post-election
remarks Cameron has said his plans are to create the
strongest devolved government anywhere. Hell have
a long way to go to match jurisdictions like Canada,
however, where the provinces have control over taxation,
health, education, and the implementation of justice.
And just how a four-country federation could work with85% of the population living in England is only one
of the tough questions to be answered in the debate.Cameron wont, however, want to get bogged down
in extended constitutional wrangling at home; hesgot treaty change with Europe on his agenda and the
result here will frame his legacy as prime minister.
David Cameron doesnt want to be the leader who
sleepwalked Britain out of Europe.
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First Grexit, then Brexit?
Thanks to the rise of UKIP, the prime minister must
attempt to lance the Eurosceptic boil that sits on the
body politic of the United Kingdom. Cameron hopesthat, by offering and winning a referendum, he can
remove the European question from the British
political agenda for years to come.
Prime Minister Cameron is but the latest in a long lineof British leaders to grapple with the European question:
John Majors (slim) majority government began its
unravelling over the Maastricht Treaty; Tony Blairs
government struggled over whether to join the Euro;
Gordon Browns premiership unfolded as the Eurozone
went into freefall during the global economic recession;
and now David Cameron has been forced into offeringan in-out referendum by his restive backbench.
The war will unfold over two battles: the referendum
itself; and the preceding negotiation to secure
a better deal from Europe.
Here, the unexpected election result has greatly
strengthened Camerons hand. Even with a slim
majority he holds a stronger position than he wouldwith a coalition partner at this side. Every single Tory
ran on a manifesto pledge to offer the British people
a choice on Europe. As a result, every single European
leader knows that a reckoning is coming and that it isin their interest to sweeten Camerons pot to some
degree ahead of a vote.
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It wont be easy. There are a lot of European diplomats
who are fed up with British demands for special
treatment. But the alternative seeing Britain leave
would be worse. And with Greece teetering on the
southern edge of the Eurozone, the last thing European
policy makers will want is another front opened up to
the North.
While the so-called four freedoms the free
movement of persons, goods, services, and capital
wont be up for negotiation, there is room for movement
on other fronts. Cameron knows he wont be able to
placate the hard-line group of 60 or so of his MPs that
want out of Europe no matter what; his task will be
to put something substantive on the table for the
remaining 270 in order to try and claim victory.To deliver victory the prime minister has appointed the
good cop/bad cop team of George Osborne and Philip
Hammond. While Osborne shares Camerons viewthat Britain is better off within the EU, Hammond has
a more jaundiced view of Europe. If they are to get
what they want, they will have to ensure this is a fight
between Britain and Brussels bureaucrats, and not
between Britain and the countries of the EuropeanUnion. There are indications of goodwill; European
Commission President Jean Claude Juncker has made
some positive noises following Camerons re-election,
but will need some positive noises back from hisBritish counterparts if any real progress is to be made.
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The shape of the ensuing deal is widely presumed
to be immediate concessions on issues like migrant
benefits, with eventual, albeit ill-defined, treaty change
at some unspecified future moment. Tone, as well as
form, will matter, and Britains refusal to help settle
migrants attempting the Mediterranean crossing
will have done nothing to improve the mood in the
diplomatic salons of Europe.
The main challenge in this pas de deux will be to
keep the entire negotiation from looking like a stitch
up. The rebellious Conservative backbench knows it
wont get significant European treaty change, but it will
need to feel that its interests are being pursued withmaximum sincerity and vigour by the government.
Send in the private sector troops
If Cameron has his way he will secure his deal with
Europe as soon as possible. The longer the process
drags out, the more his hold over his caucus weakens,
and the more impact it has on his overall program.
He has promised a referendum by the end of 2017 but
would greatly prefer to hold it in 2016. So, it turns out,
would Bank of England Governor Mark Carney, whosejob of calibrating monetary policy is made infinitely
harder thanks to the political instability caused by
haggling over Europe.
Once he is able to present his European deal tothe people of Britain, Cameron will look to mobilise
support for the yes side. Here, he will look to British
industry, both large and small, to help make the case
for Britain in Europe.
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The leading Eurosceptics in the caucus including
heavyweights like Boris Johnson, Owen Paterson,
the former Environment secretary, and former Minister
David Davis are convinced Britains business would
thrive outside of the European project. If they are to be
convinced otherwise, it must be done by business
leaders and their workers.
Cameron will be looking for all the help he can get
and there will be ample opportunity for the private
sector to partner with the government to present
the case for Europe.
The big question for the yes camp will be how
much to highlight the dangers of leaving, the benefits
of staying, or to what degree to mix the message.
The recent Scottish independence referendum dweltmore on fear than hope; experience suggests a better
effort will need to be made to highlight the benefits
of Britains relationship with Europe.
Here, Cameron will have multi-partisan help.
While he might end up fighting a significant portion
of his own party, Prime Minister Cameron will be able
to count on the support of a majority of Labour, SNP,and Liberal Democrat MPs as he stumps for Europe.
David Cameron and Nicola Sturgeon might not agree
on much, but they are both of the opinion that Britain
belongs in Europe.
With close cooperation between government and
industry, Cameron should be able to carry the day.
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A long road ahead
Nothing derails a political agenda like an existential
crisis. The prime minister faces two Europe and
Scotland in this, his second term. They will be thefight of David Camerons political life and will define
his legacy. But they will hardly be his only battles.
Britains finances remain in a parlous state. A lackof productivity threatens the long-term recovery of theeconomy. The armed forces are threadbare. Syria is
in flames and ISIS terror is spreading ever wider.
Vladimir Putins revanchism shows no signs of
abating. Greece could yet send the European Union
down the drain. And then there are the usual nagging
scandals of government: misspending, inept
performance by ministers, and tin pot rebellions.
David Camerons leadership will be tested to a degree
with which he is unfamiliar. He must approach Europe
and Scotland with strategy, and not his usual bag of
tactics. If he displays leadership and marshals his
allies he can win both fights.
In so doing, he would cement his place in history
and leave the Conservatives as the dominant partyin a United Kingdom.
To discuss this paper and what the election results
mean for businesses in Britain, send an email to
andrew.macdougall@mslgroup.comor tweet
@AGMacDougall.
Click hereand hereto read the first two instalments
in this series on the United Kingdom election.
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