Blair looks third-time lucky

Mayo 2005

From The Economist Global Agenda


Despite continuing accusations that he lied to the British public over the Iraq war, and some gathering economic clouds, Tony Blair looks set to win a third term of office on Thursday. But how will he handle the big challenges ahead? And how soon will he pass them on to his expected successor, Gordon Brown?

THE candidates and the political pundits are doing their best to whip up a bit of excitement but Britain’s election on Thursday May 5th looks like a foregone conclusion. A poll by Populus in the London Times on Wednesday puts prime minister Tony Blair’s Labour Party 14 percentage points ahead, with 41% compared with 27% for the main opposition Conservatives and 23% for the Liberal Democrats. Mr Blair now seems certain to take his party to a third consecutive victory for the first time in its history.

The prime minister’s main concern is that his supporters may be so sure of his victory that many will not bother to vote. This could mean a string of defeats in marginal constituencies and thus a steep drop in Labour’s majority—a comfortable 165 seats (in a chamber of 659) at the 2001 election. If so, the next Parliament, which Mr Blair insists will be his last as prime minister, could be more of a struggle for the government than the last two.

Mr Blair is sailing to victory despite accusations from his opponents that he lied to the British public over Saddam Hussein’s supposed weapons of mass destruction, to justify sending troops to Iraq in 2003. In the closing stages of the election campaign, the issue was given fresh life by the leaking of the attorney-general’s advice to the government on the eve of the war, which seemed to express doubts about its legality. This week, the widow of the latest British soldier to die in Iraq blamed the prime minister for her husband’s death. The father of another soldier killed in Iraq is standing against Mr Blair in his constituency in north-east England.

But for all the continuing disquiet over Iraq, including among many Labour parliamentarians, Mr Blair’s poll lead has grown during the campaign. Though voters have lost faith in the prime minister, they trust the Conservative leader, Michael Howard, even less. So successfully has Mr Blair stolen the Conservatives’ best clothes—sound economic management and reform of public services—that Mr Howard has resorted to right-wing populism, trying to whip up fears about immigration. To little avail, it would seem.

Though Britain’s long run of economic growth began under the last Conservative government, its continuation since Mr Blair’s first win in 1997 has reinforced Labour’s argument that it is best for the economy. After decades of relative decline, Britain now has a higher GDP per head than Germany, France and Italy—though this has much to do with the continental countries’ stagnation. Britain’s superior performance is partly due to Labour continuing Margaret Thatcher’s pro-market policies. But Gordon Brown, the finance minister, also deserves praise for having given the Bank of England control over monetary policy in 1997 and for keeping both public spending and taxes under control in his early years in office.

Things can only get…worse

While the economy has been Labour’s strongest electoral card, the government has been storing up trouble for the future. Surging spending, beginning just before the 2001 election, and weak tax revenues have swung the public finances from a surplus of 1.6% of GDP in 2000-01 to a deficit of 2.9% in 2004-05. With spending on health scheduled to continue to grow rapidly until 2008, either other spending will need to be cut sharply or there will have to be a big tax increase. Either way, the economy will be hit, just as dark clouds are gathering on the horizon.

Britain’s recent growth has been consumer-driven, boosted by soaring house prices. But the property market is slowing and consumers are responding to recent interest-rate rises by tightening their belts. The Confederation of British Industry reported this week that its monthly survey of retailers was the gloomiest since the 1992 currency crisis that saw sterling pulled from Europe’s exchange-rate mechanism. Manufacturers are also flagging, with big job losses resulting from the collapse of MG Rover, a carmaker, and more likely to come at Marconi, an electronics giant.

Having to raise taxes or slow spending (and perhaps cut state jobs) during a downturn would be especially tough. It could also undermine Mr Blair’s plans for a smooth handover, perhaps towards the end of the coming Parliament, to Mr Brown, who has been disgruntled for years over Mr Blair’s failure to step aside sooner. If Mr Brown deserves a large share of the credit for Britain’s strong economic performance, will he not attract much of the blame if the economy now turns soggy?

A weak economy, especially if combined with a reduced parliamentary majority, would make it harder for the government to continue vital reforms to the National Health Service (NHS), which Britons consistently tell pollsters is the most important issue facing the country. Having doubled the NHS budget in the past eight years and found that extra money does not make much difference without reforms to raise productivity, Mr. Blair has done a U-turn and reintroduced market-based reforms similar to the ones that he scrapped on taking power from the Conservatives. The government has started rolling out a project in which hospitals in England (the rest of Britain has different arrangements) will be paid for each treatment instead of getting block grants. To spur competition, private health firms are being invited to bid for non-urgent operations. Already, about 4% of such state-funded surgery is “privatised” and the government aims to raise this to 15%.

All very sensible. But taken to its logical conclusion, this market in treatments may mean some of the least efficient state hospitals go bust. Will Mr. Blair withstand the pressure from the health unions and their friends on the Labour backbenches—who hate the marketisation of health—to “rescue” such hospitals, thereby undoing the reforms?

Perhaps a more urgent challenge for a re-elected Mr. Blair will be the referendum he has promised to hold next year on the proposed European Union constitution. If Britons vote to reject the document, Mr. Blair could be forced out of 10 Downing Street earlier than he would like, and with his work unfinished. Of course he could get off scot-free, if France’s voters say no in their referendum, later this month, which would probably kill the constitution. A run of polls said the French would reject the constitution but the latest ones, this week, suggest that it could be oui after all. It would be unsurprising if, behind his smiles, Mr. Blair is more worried about the mood of French voters than he is about his countrymen’s