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Businesses need to be better prepared for the prospect of a Labour-led Government

by Vernon Hunte

Two men are walking through a forest. Suddenly, they see a tiger in the distance, running towards them. One of them takes some running shoes from his bag, and starts putting them on.

“What are you doing?” says the other man. “Do you think you will run faster than the tiger with those?”

“I don’t have to run faster than the tiger,” he says.  “I just have to run faster than you.”

Public anger and dissatisfaction with the political establishment is high. A reckoning is coming in the expected General Election in November, but which party will take the most punishment?

As we look to the next few weeks in British politics, and a General Election in November, the potential scenarios are endless. The primary question is how the UK Government will request an extension to the Article 50 process, and secondarily how Brexit will impact the forthcoming General Election campaign.

In the coming vote the prospects for a Labour-led Government are higher than many assume (or want to recognise). This view is not led from my study of current opinion polling (which have had a very poor recent record in elections and referendums), or assumptions on campaigning in weeks to come (there is still all to play for, and there will be surprises). Instead it is informed by simple Parliamentary arithmetic regarding the areas where the two main parties are most vulnerable.

The Conservatives Party won 317 seats at the last election, with 42.4% of the vote (remarkably, the highest share of the vote by any party since New Labour in 1997). They are now down to 288 MPs following the expulsions of 21 backbenchers last week.

It is commonly assumed that for the next election the Conservative Party look vulnerable in:

  • London – though they have few seats left to lose, and speculation that the PM may lose his seat seems on the outer limit of possibilities
  • South coast, especially South West – Conservatives will be going up against a resurgent Liberal Democrats with a clear message on Brexit
  • Scotland – Where the Conservatives are potentially looking at a wipe-out following the resignation of Ruth Davidson as Scottish Conservative leader, combined with the unpopularity of the Prime Minister.

In addition, the expulsion of 21 Conservative backbenchers potentially opens up a series of races where incumbent Independent Conservatives split the base vote with newly selected Conservative candidates. It remains to be seen how many backbenchers are allowed and willing to return to the party fold before election day.

Conservative ambitions and hopes rest on picking up seats in the Midlands and the North, home to many traditional Labour heartlands which lean heavily in favour of Brexit. The problem here is it looks like the Brexit Party will split the pro-Brexit vote to Labour’s advantage. In addition, there is data showing that Labour ‘Leave’ voters are reluctant to change their party solely due to Brexit (unlike Labour Remainers).

To be clear, I think the opportunity for Labour gains is equally limited, largely due to the negative public perception about the competency of Jeremy Corbyn and his core team. However, the critical point is Labour do not have to do well for the Conservatives to lose the ability to form a Government. As an example here is an entirely hypothetical example of how that could happen in a future election:

State of the Parliamentary Parties

In this election scenario few seats change hands, but enough do for another “badly hung” Parliament. As Sinn Fein MP do not take their seats at Westminster, in this scenario a Prime Minister would need 320 seats for a working majority.

On the ‘pro-Brexit side’, the Conservatives, even with DUP votes and the nominal Brexit Party MP, can only reach 308.

Whereas the Labour Party, which has also lost seats, now has the capacity to form some working arrangement with the Liberal Democrats and SNP. A confidence arrangement on that basis would bring together 326 MPs (or 331 if you include Green and Plaid). That opens up a number of confidence-and-supply deals on a softer Brexit/2nd Referendum, on a 2nd Scottish Independence Referendum and even opens up the prospect of political/electoral reform. It would be an unstable, dramatic arrangement, with prospects for yet another General Election not far from the horizon. The impact on sterling and the markets would be huge.

Of course, in this scenario there are many questions here, could the Liberal Democrats support a Corbyn-led administration even on a vote-by-vote basis? Could the Labour Parliamentary Party hold together?

For all companies, especially those engaging with Government, the key takeaway is to prepare fully for the prospect of a Labour-led administration and their policy platform, and to keep abreast of the likely red lines and priorities of the smaller parties. Assuming the continuation of Conservative Government, without any contingency planning, represents the real risk for those with interest in the public sector and public policy.