Britain woke up yesterday to the unsettling realization that, for the first time in more than 30 years, no one had really won. In the time-honored fashion of British sporting ineptitude it seems likely that it will eventually be the team that lost least badly that gets a chance to form a government. As the largest party, David Cameron's Conservatives are deemed the ones most likely to succeed in frantically trying to cobble together some kind of an administration.
Unfortunately for Britain, the crisis of governance revealed by the election campaign that crawled to its anticlimax on Thursday comes at an especially bad time. In a way it was fitting that no party really won this week. The most depressing aspect of the campaign was the poverty of real choice on offer to the British voters - even in the teeth of one of the fiercest economic challenges the country has faced in the last 50 years. The U.K. has, according to data from the European Commission published last week, the largest fiscal deficit in the European Union, at 13% of national income, even larger than the U.S. deficit. The scale of Britain's spending crisis is vast on either side of the ledger: Public spending has risen above 50% of gross domestic product in the last two years, while revenues have fallen below 40%, to their lowest level since the 1960s.
Only part of this mess is owed to the financial crisis and recession. Even after a strong economic recovery (should there be one), the U.K. will be running a large deficit. In short, Britain is one of the largest of the sovereign debt challenges that threatens the global financial system. For Britain itself, the message of what has been going on in financial markets in the last few weeks, where nervousness about the sustainability of the public finances of Greece, Portugal, Spain and others, is clear - get your fiscal house in order.
But this week, as this nervousness deepened and markets fell further, it was as though the British political parties seemed to have agreed on a pact not to frighten the voters with any serious talk about the towering scale of Britain's fiscal crisis. Other than bromides about the importance of reducing debt, and some general and implausible plans to rein back spending on "fraud, waste and abuse," there was little on offer from any of the parties to confront the challenge.
In fact, even as they paid lip service to the scale of the fiscal dangers, the British political leaders' promises to voters seem to involve more spending increases. On Wednesday, the day before the election, British televisions were in split-screen mode; on one side Messrs. Brown, Cameron and Clegg roamed the country competing to offer more money for health spending, education or the environment. On the other side, Greece, member of the euro zone, was burning as the political consequences of years of failing to address mounting debt problems were laid bare.
To be sure, Britain's public finances are much more manageable than Greece's. Its debt is less than half that of Greece's in relation to its national income. But the direction of the U.K.'s economics and politics are clear - and run directly counter to the nation's pressing needs. The reality is that the state has - in economic terms - become so dominant in Britain, the public largesse so pervasive, that the political costs of reining it back are seen as dangerously high for any party that wants to get elected.
At over 50% of national income, the public sector in the U.K. is now as big as in Scandinavia, higher than in Germany, and up from the roughly 40% it accounted for from when Margaret Thatcher left power to the early years of Tony Blair's Labour government. Even as the recession fades, and that share falls somewhat, the U.K. will still be left with a vastly expanded government role.
The political challenge of rolling back that growth - something all parties are at least notionally committed to - is that any effort by politicians to cut spending is met with howls from those who get hit by cuts. In the U.K., the universal principle behind much of the public spending - a free-at-service national health service for example, or a child benefits program that awards tax credits to all families with children, whatever their income levels - entrenches still further the role of the state - and weakens still further the resolve of politicians to tackle it.
Consider this: In Scotland - the birthplace of the intellectual founder of free-market economics - the state now accounts for 60% of national income. The political consequences are unsurprising. The Conservative party, once the staunchest defender of Adam Smith's ideas, is now the fourth party north of the border: On Thursday it won one of the 59 parliamentary seats there.
It's hardly surprising, then, that in the U.K. as a whole, the Conservatives, confronted with an alarming slide in the opinion polls, retreated from an earlier warning that, if elected, they would need to pursue a policy of austerity, and fell back instead on vague promises of cuts that threatened no real hurt to the large army of recipients of public money.