Summer of discontent

UK politics has been a series of events happening at a bewildering pace since the EU referendum, and I had to redraft this piece completely. After Andrea Leadsom withdrew from the Conservative leadership contest, Theresa May will become the next UK prime minister very soon. Britain has avoided a prolonged period of political paralysis as far as the government is concerned, even though Labour is still in turmoil. Mrs May will start her premiership in extremely challenging circumstances, and – barring an early general election that she loses – the UK’s future will depend on her administration.

The biggest current issue is naturally Brexit and its consequences. The UK will have to come up with a plan outlining what it wants in this divorce settlement. The country has been divided and it will take an enormous amount of goodwill and leadership to heal that political and social division. The main problem for Mrs May is that while those who have voted for leaving the EU did so on many grounds, and satisfying all the promises and expectations is impossible, yet she has to deliver something they want, those who have voted to remain are aggrieved about the decision and could coalesce against her government.

Britain’s social cohesiveness seems to be under increased strain. There have been increased reports of hate crime, and such a situation may lead to community tensions. The concrete and narrow issue may concern the status of EU/EEA citizens currently residing in the UK, but such distinctions are probably not observed by the more vicious elements who hold anti-immigrant sentiments. The tensions could bubble up: while the roots and dynamics were different, the memories of the 2011 riots are still fresh.

The in tray for Mrs May is going to be pretty full and make for a depressing reading even after excluding Brexit. Junior doctors have rejected the proposed contract and the Health Secretary intends to impose it in the autumn, and teachers were on strike as well: these would have been big news had they not been overshadowed by Brexit. Transport is in a mess too. Southern has revised its timetables slashing services, and the location of the third runway still needs to be decided. Education, health, and transport have relatively high levels of unionization thus organization, and the government could do without industrial action when it needs to concentrate on Brexit negotiations.

The economy might not have been all that well even without Brexit, even if Brexit as an event and process is likely to have negative effects on the economy. In other words, Brexit may not only be the cause of difficulties, but it may accelerate and accentuate existing problems with the UK economy. While the problems at BHS might have been sui generis, its failure was nevertheless symbolic rather like the demise of Woolworth’s, and Austin Reed went under as well. As shopping habits change, there may be more turbulences on the high streets and stock markets, especially if there are Brexit-induced complications for certain sectors.

There are indications that the austerity policies might be untenable, since neither the UK economy nor society can bear them. The easing of austerity means more public borrowing: as money is currently cheap and eminently printable, there is an argument for a clear course of vastly increased public borrowing and spending as well as ensuring increased liquidity in general to keep the economy going. The window of opportunity for expansive fiscal and monetary policies could be relatively narrow. The value of the pound could fall further before it stabilizes and commodity prices might go up. If inflation manifests itself, then it could severely restrict what the UK can do fiscally or monetarily even in a recessionary environment.

Generally speaking there may be what can be termed as a deficit in political legitimacy to pursue Brexit and – if it comes to it – the abandonment of austerity. Mrs May campaigned lukewarmly for the remain camp. Many MPs were for remain. How could such a government and parliament be in a position to implement the will of the people? Fiscal discipline thus austerity has been central to the Conservatives’ economic policy, so ditching it would be a difficult task. One possible solution is to hold an early election, which could probably be engineered, but that might return an anti-Brexit parliament.

An air of uncertainty hangs over Britain. It may not just be uncertainty, but also anger and disillusionment: the UK might be heading towards a summer of discontent.