UK – Will the New Government Helps?

We know for sure now the British general election produced a truly knife-edge results. With 326 of 650 members of parliament needed for a majority, the conservatives have 306, labour has 258 and the liberal democrats 57 and minor parties 28.

Question is that how this coalition government to change the façade of the UK economy and possibly lead to better days ahead. Out from the shadows comes the wrongly derided ghost of such coalition – the 1931 First National Government. The last such coalition took place in a time of equivalent financial crisis – the autumn of 1931. Then, as now – a Labour government (then a minority government) had increased public spending and run up deficits. Remember – we are talking about a period that was only two years removed from Wall Street’s Great Crash and one in which the global Great Depression was deepening.

The National Government was formed to solve the financial crisis. It acquired a mixed posthumous reputation and in its form, it lasted only a year as Home Secretary Samuel resigned over the issue of modest Imperial Preference tariffs in 1932. It then became a largely Conservative government, although it retained several ‘Liberal National’ cabinet ministers, including Sir John Simon.

However, its economy policy was remarkably successful. It took British off the Gold Standard, devaluing pound by about 20%. It cut public spending sharply, reducing public sector pay by 10% and ended the British policy of unilateral free trade, introducing modest tariffs with exemptions for the British Empire. As a result of that, Britian enjoyed the highest five-year GDP growth in its history – lasting until 1937. New industries such as automobiles, chemicals and aircrafts – energized the economy, as did such new inventions as radar, nylon and the intellectual underpinnings of the jet engine, the computer and atomic power.

The National government was able to take unpopular decisions because of its broad popular support – 67.2% of the voters had supported it in 193e1 and it was re-elected in 1935 with 53.3% of the vote.

This would be the principal advantage of a Conservative-Liberal Democrat coalition today, which would have 59.1% of the vote and would also have a House of Commons majority of 76 seats.