Global prestige waning: a crowd watches the Royal Navy's flagship HMS Ark Royal dock in Portsmouth for the last time
After becoming Conservative leader in 2005, David Cameron must have surely allowed himself to imagine what it would be like, someday, to walk through the famous black door at 10 Downing Street as prime minister. He had already let it be known he was the “heir to Blair,” despite the inconvenient presence of Gordon Brown. He would be forgiven for musing dreamily about being welcomed to power by a buoyant national mood, one reminiscent of the relief and optimism that greeted Blair in 1997.
What Cameron got instead, of course, was an election that no party won outright, a mixed mandate, an uneasy coalition and that haunting, handwritten note which departing Labour treasury minister Liam Byrne left behind for his successor: “I’m afraid there’s no money. Kind regards—and good luck!”
Having inherited some of the worst fiscal imbalances in the developed world, the coalition had to quickly forget “compassionate conservatism”; compassion costs money, as do ambitious plans to green both the country and the economy. The top priority became to reduce the deficit.
Yet it would be wrong to identify the financial crisis alone as responsible for the coalition’s problems. Even as the new government coped with a full-blown war in Afghanistan and the remains of one in Iraq, it had to adjust Britain’s changing role in the world. The emergence of giant economies like China and India means that Britain has a smaller seat at the increasingly crowded top table of nations; the cosy old G6 (then 7, then 8) had quickly grown to the G20. The US, tilting toward Asia, has been recalibrating its alliances, including the longstanding “special relationship” that had given Britain an outsized importance on the world stage.
Mindful of these realities, and surveying the economic wasteland before him, Cameron constructed a commercially-minded foreign policy—one that would develop Britain’s relationships for the good of its economy. Then along came revolutions in Egypt and Tunisia, a civil war in Libya, and major protests across the greater Middle East. Once again, Cameron’s calculations were buried beneath the reality of events.
Libya, in particular, has exposed the reality of what Britain can and cannot do on the world stage. Economically crippled but still blessed with a moral authority in world affairs, Britain helped to lead the charge against Muammar Gaddafi. But it could only do so much: according to reports, in the first wave of attacks, Britain fired two cruise missiles and the US 122. And Washington—from which London draws much of its geopolitical heft—wanted as little involvement as possible. From the outset, President Obama emphasised that the US would play no more than “a supporting role” in the enterprise.
As full as his plate was, Cameron’s first year was inevitably defined by cuts. YouGov, the polling organisation, has tracked the government’s approval rating since its earliest days (see p28). The changing picture charts the country’s darkening mood. For a few months—the summer of 2010—approval outpaced disapproval. But the margin narrowed day by day, week by week, and in October—once the speeches at the Conservative party conference clarified the scale of the coming cuts—both approvers and “don’t knows” moved increasingly into the “disapprove” column. The most recent data shows that 56 per cent of voters disapprove of the government’s record to date.
Yet, a year after the election, the cutting has only just begun to take effect. This early, it is folly to forecast how the government will fare. There will doubtless be repercussions as civil service jobs are lost and public services curtailed, but they will have to be weighed against the chances of a recovering economy and falling unemployment, along with the possibility that cuts in frontline services turn out to be less painful than many feared.
For now, the news for the government is nowhere near as bad as it might be. Surveying voting intention before and after George Osborne’s budget statement in March, YouGov found that the Tories had narrowed Labour’s lead. This is remarkable considering the depth and breadth of the cuts: the coalition is, after all, the first government since the second world war to reduce significantly the share of national income devoted to the welfare state.
Perhaps this is because Britain has, in a sense, been preparing for this moment—the downsizing of the welfare state—since the 1980s. Despite their many differences, the last five prime ministers (Thatcher, Major, Blair, Brown, Cameron) have all had a role in deconstructing the postwar social provisions. The nomenclature and style may vary, but the overall direction of travel, to use the grating argot of Whitehall technocrats, has been similar as the parties jostle for the centre ground. The very existence of the Conservative-Lib Dem coalition—not to mention the notion it could have been a Labour-Lib Dem one—is emblematic of the one-size-fits-all, post-ideological world.
In the early days of Cameron’s leadership, when people around him spoke of him being the “heir to Blair,” they meant, among other things, that he had the same keen sense of where the votes are: in middle England. Just as Thatcher’s economic reforms found a home in new Labour’s pro-business, union-sceptic agenda, there’s a distinct Blairite hue to Cameron’s core programme, from giving state schools a measure of autonomy to forcing competition upon hospitals and GP surgeries. It’s not surprising that some of Blair’s closest aides—even (or especially) as they prepared to turn the government over to Brown—warmed to Cameron and wished him well.
From Thatcherism through to the Third Way and then the Big Society, successive British governments have sought to create a society that is in many ways less European and more American. One of the plainest signs of this is the British tax structure: personal income tax rates are, as it were, mid-Atlantic, well above the US and somewhat below the larger continental economies. And on British tax revenues, you can’t afford Swedish or even German safety nets.
Britain, in other words, was living beyond its means long before the financial crisis. Gordon Brown and Alistair Darling have liked to say that the crisis was a global catastrophe triggered by the US subprime mortgage crisis. True, up to a point. But Britons were no strangers to the borrowing binge. In fact, British consumer borrowing levels remain higher than in the US. Anybody who took out a mortgage in this country prior to 2007 knows that mortgage lenders were hardly exacting in their investigations of borrowers’ credit-worthiness. In 2009 the Labour government was borrowing one pound out of every four that it spent. Interest on government debt was strangling the economy, and continues to do so. In 2011-12 the coalition government will spend £50bn—25 per cent more than the defence budget—on interest.
One obvious reason why Britain was hit so hard by the financial crisis is the disproportionate size of its banking sector. As a financial centre, the City rivals Wall Street in size—but the US economy is about six and a half times larger than Britain’s. When the crisis struck, three of the world’s five largest banks were based in Britain. The largest, RBS, is now more than 80 per cent owned by the state. Right before its fall, RBS’s (questionable) assets were approximately equal to Britain’s GDP.
Yet it is easy to understand why the government’s response to the disaster has people yearning for some other way out of the fiscal mess. That emotion was palpable during the “March for the Alternative” in London in late March; yet so was the absence of a realistic alternative. Labour leader Ed Miliband has said he would limit cuts to £40bn compared to the Tories’ £81bn. The idea of fewer cuts over a longer period of time may have populist appeal, but would such a strategy do the job?
The OECD reinforces the argument that Britain came into the recession more severely “off-balance” than other major economies, and thus has had more to correct. As OECD Secretary-General Angel Gurría put it before Osborne’s budget statement in March: “The fiscal position was clearly unsustainable. The consolidation measures and plans that the chancellor and his colleagues have put in place were therefore vital.”
***
It is instructive to view Britain through a wider lens than the cuts alone. Cameron and Clegg are running a country that is very different from the one they grew up in during the 1970s and 1980s. Even in the decades after it lost its empire, Britain managed to behave like a pocket superpower. Its economic strength and cultural heft, its nuclear-backed military might, its extraordinary relationship with America—all of these helped a small island nation command authority in world affairs. Later on, Blair sought to reinvigorate Britain as a world power and to cement its economic successes by hugging America close. Ultimately, this ended in failure for Blair as Iraq took its toll.
Even before the 2010 election, parliamentary committees and London think tanks were reappraising Britain’s role in the world. Budget cuts were inevitable, and this would in the long run affect Britain’s ability to project military power and diplomatic influence. Moreover, the transatlantic alliance in which Britain was such an important partner was in a state of flux: Europeans were wary of American military adventures, and the US was increasingly turning its attention away from Britain and Europe and toward Latin America, its greatest source of new immigration, and especially China and India.
The Cameron-Clegg government has tried to make the best of the new world order. Identifying the political dangers that Blair had exposed himself to, Cameron promoted a “solid but not slavish” bond with the US. Recognising the need to do whatever he could to prop up Britain’s economy, he scanned the globe for new economic opportunities and partnerships. Cameron’s new approach was perfectly encapsulated by his paying homage to Britain’s other “special relationship”—with India.
It is at times painfully obvious when the coalition is being pulled in different directions by competing constituencies. In the wake of the financial crisis, electoral politics demands that the government exact its pound of flesh from the City. Yet the City has been the great engine of British prosperity; financial services make up as much as one quarter of the economy. Squirming, the government must balance sating the bloodlust of the mob against sabotaging the country’s economic recovery.
When Blair arrived in No 10 in 1997 it was not just the economy that was humming. Britons embraced change, saw promise in immigration, applauded the impact of their artists on global arts and culture, respected wealth, were opening up to Europe, and were generally optimistic about their future and the changing role of Britain in the world. Now, we brood about everything, including our politicians, under leaden clouds that mock that new dawn of 1997. Cameron’s job—and the job of the coalition, if it lasts—is to lift those clouds. Their first steps seem, on balance, to set off in the right direction. But if the period between Cameron’s ascension to the party leadership and today is any guide, the coming months and years could be filled with more peril than promise.
Also in this month’s Coalition Britain special:
Charles Kennedy explains why he has come round to the coalition.
The Economist’s Janan Ganeshon why Cameron needs to fight for his bold ideas
Anatole Kaletsky argues that the cuts will ruin the economy—but for Tory benefit.
GP Catriona Chatfield says the NHS reforms imperil the fundamental basis of the health service: trust between doctors and patients.
After becoming Conservative leader in 2005, David Cameron must have surely allowed himself to imagine what it would be like, someday, to walk through the famous black door at 10 Downing Street as prime minister. He had already let it be known he was the “heir to Blair,” despite the inconvenient presence of Gordon Brown. He would be forgiven for musing dreamily about being welcomed to power by a buoyant national mood, one reminiscent of the relief and optimism that greeted Blair in 1997.
What Cameron got instead, of course, was an election that no party won outright, a mixed mandate, an uneasy coalition and that haunting, handwritten note which departing Labour treasury minister Liam Byrne left behind for his successor: “I’m afraid there’s no money. Kind regards—and good luck!”
Having inherited some of the worst fiscal imbalances in the developed world, the coalition had to quickly forget “compassionate conservatism”; compassion costs money, as do ambitious plans to green both the country and the economy. The top priority became to reduce the deficit.
Yet it would be wrong to identify the financial crisis alone as responsible for the coalition’s problems. Even as the new government coped with a full-blown war in Afghanistan and the remains of one in Iraq, it had to adjust Britain’s changing role in the world. The emergence of giant economies like China and India means that Britain has a smaller seat at the increasingly crowded top table of nations; the cosy old G6 (then 7, then 8) had quickly grown to the G20. The US, tilting toward Asia, has been recalibrating its alliances, including the longstanding “special relationship” that had given Britain an outsized importance on the world stage.
Mindful of these realities, and surveying the economic wasteland before him, Cameron constructed a commercially-minded foreign policy—one that would develop Britain’s relationships for the good of its economy. Then along came revolutions in Egypt and Tunisia, a civil war in Libya, and major protests across the greater Middle East. Once again, Cameron’s calculations were buried beneath the reality of events.
Libya, in particular, has exposed the reality of what Britain can and cannot do on the world stage. Economically crippled but still blessed with a moral authority in world affairs, Britain helped to lead the charge against Muammar Gaddafi. But it could only do so much: according to reports, in the first wave of attacks, Britain fired two cruise missiles and the US 122. And Washington—from which London draws much of its geopolitical heft—wanted as little involvement as possible. From the outset, President Obama emphasised that the US would play no more than “a supporting role” in the enterprise.
As full as his plate was, Cameron’s first year was inevitably defined by cuts. YouGov, the polling organisation, has tracked the government’s approval rating since its earliest days (see p28). The changing picture charts the country’s darkening mood. For a few months—the summer of 2010—approval outpaced disapproval. But the margin narrowed day by day, week by week, and in October—once the speeches at the Conservative party conference clarified the scale of the coming cuts—both approvers and “don’t knows” moved increasingly into the “disapprove” column. The most recent data shows that 56 per cent of voters disapprove of the government’s record to date.
Yet, a year after the election, the cutting has only just begun to take effect. This early, it is folly to forecast how the government will fare. There will doubtless be repercussions as civil service jobs are lost and public services curtailed, but they will have to be weighed against the chances of a recovering economy and falling unemployment, along with the possibility that cuts in frontline services turn out to be less painful than many feared.
For now, the news for the government is nowhere near as bad as it might be. Surveying voting intention before and after George Osborne’s budget statement in March, YouGov found that the Tories had narrowed Labour’s lead. This is remarkable considering the depth and breadth of the cuts: the coalition is, after all, the first government since the second world war to reduce significantly the share of national income devoted to the welfare state.
Perhaps this is because Britain has, in a sense, been preparing for this moment—the downsizing of the welfare state—since the 1980s. Despite their many differences, the last five prime ministers (Thatcher, Major, Blair, Brown, Cameron) have all had a role in deconstructing the postwar social provisions. The nomenclature and style may vary, but the overall direction of travel, to use the grating argot of Whitehall technocrats, has been similar as the parties jostle for the centre ground. The very existence of the Conservative-Lib Dem coalition—not to mention the notion it could have been a Labour-Lib Dem one—is emblematic of the one-size-fits-all, post-ideological world.
In the early days of Cameron’s leadership, when people around him spoke of him being the “heir to Blair,” they meant, among other things, that he had the same keen sense of where the votes are: in middle England. Just as Thatcher’s economic reforms found a home in new Labour’s pro-business, union-sceptic agenda, there’s a distinct Blairite hue to Cameron’s core programme, from giving state schools a measure of autonomy to forcing competition upon hospitals and GP surgeries. It’s not surprising that some of Blair’s closest aides—even (or especially) as they prepared to turn the government over to Brown—warmed to Cameron and wished him well.
From Thatcherism through to the Third Way and then the Big Society, successive British governments have sought to create a society that is in many ways less European and more American. One of the plainest signs of this is the British tax structure: personal income tax rates are, as it were, mid-Atlantic, well above the US and somewhat below the larger continental economies. And on British tax revenues, you can’t afford Swedish or even German safety nets.
Britain, in other words, was living beyond its means long before the financial crisis. Gordon Brown and Alistair Darling have liked to say that the crisis was a global catastrophe triggered by the US subprime mortgage crisis. True, up to a point. But Britons were no strangers to the borrowing binge. In fact, British consumer borrowing levels remain higher than in the US. Anybody who took out a mortgage in this country prior to 2007 knows that mortgage lenders were hardly exacting in their investigations of borrowers’ credit-worthiness. In 2009 the Labour government was borrowing one pound out of every four that it spent. Interest on government debt was strangling the economy, and continues to do so. In 2011-12 the coalition government will spend £50bn—25 per cent more than the defence budget—on interest.
One obvious reason why Britain was hit so hard by the financial crisis is the disproportionate size of its banking sector. As a financial centre, the City rivals Wall Street in size—but the US economy is about six and a half times larger than Britain’s. When the crisis struck, three of the world’s five largest banks were based in Britain. The largest, RBS, is now more than 80 per cent owned by the state. Right before its fall, RBS’s (questionable) assets were approximately equal to Britain’s GDP.
Yet it is easy to understand why the government’s response to the disaster has people yearning for some other way out of the fiscal mess. That emotion was palpable during the “March for the Alternative” in London in late March; yet so was the absence of a realistic alternative. Labour leader Ed Miliband has said he would limit cuts to £40bn compared to the Tories’ £81bn. The idea of fewer cuts over a longer period of time may have populist appeal, but would such a strategy do the job?
The OECD reinforces the argument that Britain came into the recession more severely “off-balance” than other major economies, and thus has had more to correct. As OECD Secretary-General Angel Gurría put it before Osborne’s budget statement in March: “The fiscal position was clearly unsustainable. The consolidation measures and plans that the chancellor and his colleagues have put in place were therefore vital.”
***
It is instructive to view Britain through a wider lens than the cuts alone. Cameron and Clegg are running a country that is very different from the one they grew up in during the 1970s and 1980s. Even in the decades after it lost its empire, Britain managed to behave like a pocket superpower. Its economic strength and cultural heft, its nuclear-backed military might, its extraordinary relationship with America—all of these helped a small island nation command authority in world affairs. Later on, Blair sought to reinvigorate Britain as a world power and to cement its economic successes by hugging America close. Ultimately, this ended in failure for Blair as Iraq took its toll.
Even before the 2010 election, parliamentary committees and London think tanks were reappraising Britain’s role in the world. Budget cuts were inevitable, and this would in the long run affect Britain’s ability to project military power and diplomatic influence. Moreover, the transatlantic alliance in which Britain was such an important partner was in a state of flux: Europeans were wary of American military adventures, and the US was increasingly turning its attention away from Britain and Europe and toward Latin America, its greatest source of new immigration, and especially China and India.
The Cameron-Clegg government has tried to make the best of the new world order. Identifying the political dangers that Blair had exposed himself to, Cameron promoted a “solid but not slavish” bond with the US. Recognising the need to do whatever he could to prop up Britain’s economy, he scanned the globe for new economic opportunities and partnerships. Cameron’s new approach was perfectly encapsulated by his paying homage to Britain’s other “special relationship”—with India.
It is at times painfully obvious when the coalition is being pulled in different directions by competing constituencies. In the wake of the financial crisis, electoral politics demands that the government exact its pound of flesh from the City. Yet the City has been the great engine of British prosperity; financial services make up as much as one quarter of the economy. Squirming, the government must balance sating the bloodlust of the mob against sabotaging the country’s economic recovery.
When Blair arrived in No 10 in 1997 it was not just the economy that was humming. Britons embraced change, saw promise in immigration, applauded the impact of their artists on global arts and culture, respected wealth, were opening up to Europe, and were generally optimistic about their future and the changing role of Britain in the world. Now, we brood about everything, including our politicians, under leaden clouds that mock that new dawn of 1997. Cameron’s job—and the job of the coalition, if it lasts—is to lift those clouds. Their first steps seem, on balance, to set off in the right direction. But if the period between Cameron’s ascension to the party leadership and today is any guide, the coming months and years could be filled with more peril than promise.
Also in this month’s Coalition Britain special:
Charles Kennedy explains why he has come round to the coalition.
The Economist’s Janan Ganeshon why Cameron needs to fight for his bold ideas
Anatole Kaletsky argues that the cuts will ruin the economy—but for Tory benefit.
GP Catriona Chatfield says the NHS reforms imperil the fundamental basis of the health service: trust between doctors and patients.
