The pound sterling surged against both the U.S. dollar and the euro this morning on the back of U.K. Prime Minister Theresa May’s call for a snap election in June.
The snap election still needs to overcome the parliamentary hurdles of two-thirds support in the House of Commons, but with all party leaders reacting favorably to this opportunity, it is likely to pass tomorrow’s parliamentary vote with ease. Opposition leader Jeremy Corbyn welcomed the PM’s surprise announcement, calling it a “chance to vote for a government that will put the interests of the majority first.”
Political rationale behind a snap election
{mosads}This morning Theresa May explained her call for a snap general election on June 8 by arguing that Britain needed certainty, stability and strong leadership. This move has, however, been seen by some commentators as controversial in light of the prime minister’s comments in September that she did not want to call a snap election and that “the next general election should be in 2020.”
With Theresa May’s Conservative Party polling consistently around 20 percent ahead of Jeremy Corbyn’s opposition Labour Party, the logic behind this quick snap election becomes blindingly obvious to any observer. The governing Conservative Party currently holds a slim majority which gives backbench MP’s significant powers to force the government to back down on various issues.
On current polling trends, the Conservatives could hold 400 seats in the commons. At the same time, Labor could lose as many 50 seats. Such a crushing defeat for Labour would almost certainly be the final nail in the coffin for their controversial left-wing leader, Jeremy Corbyn.
A strong Conservative majority would also aid the U.K.’s position in the upcoming negotiations with the rest of the EU. Contrary to the idea that a landslide Conservative victory would ensure a “Hard Brexit” that inflicts damage to the economy, May is likely to use this as a chance to secure the mandate most people appear to want on Brexit. So far we have seen the PM take a fairly conciliatory approach in the Brexit negotiations.
Potential problems with hastily-produced manifesto pledges
The downside to calling an election just seven weeks before polling day is that political parties may now rush through manifestos which are ill-considered and fiscally irresponsible. It is quite possible that any attempt at proposing policies of fiscal discipline will be abandoned, and we may well see lavish spending commitments by parties from across the spectrum.
This event also brings to fore the risk of Conservatives rolling back on promises not to raise taxes as an alternative to fiscal discipline on spending increases. Hastily produced manifesto pledges also run the risk of political lurching toward an increased regulatory burden. At a time when such populist interventions are on the rise, political leaders would be wise to avoid following such a path that will only result in reduced labor market flexibility.
Politicians should embrace this opportunity to unshackle the British economy of many burdensome regulations and embrace, instead, an economic model of permissionless innovation.
In short, the decision by Theresa May to call a quick-snap election in June provides great political opportunism for her party. Holding a strong parliamentary majority will also give her more political clout in the ongoing Brexit negotiations.
But we should also be wary of the potential negative outcomes of hastily-produced election manifestos. Let’s hope that Mrs. May puts forward an outward-looking, market-oriented election manifesto and resists the populist urges of protectionism.
Jack Salmon is a Washington, D.C.-based researcher focused on federal fiscal policy. Salmon holds an M.A. in political economy with specializations in macroeconomics and comparative economic analysis from King’s College London.
The views expressed by contributors are their own and not the views of The Hill.