View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Business
  2. Economics
24 August 2015updated 27 Aug 2015 3:12am

Which party would benefit from a UK downturn?

A crash could provide Corbyn with a chance to win a hearing. But voters may cling to the Tories for stability. 

By George Eaton

Today’s global stock market rout (dubbed “Black Monday”) means that fears of another crash are at their greatest since 2008. Larry Summers, the former US Treasury secretary, has warned that “As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.” More dramatically, Damian McBride, an adviser to Gordon Brown during the last crash, has suggested storing hard cash, panic buying bottled water, tinned goods and other essentials, and agreeing a “rally point” with loved ones “in case transport and communication gets cut off”. Of special concern to economists is what HSBC’s Stephen King calls the “Titantic problem”: lots of icebergs but no lifeboats. High government deficits and record-low interest rates mean that states have few bullets to fire in the event of another crash. 

The possibility of a UK downturn is already being viewed by some as a boon for Jeremy Corbyn, Labour’s likely next leader. His unorthodox policy suggestions, such as people’s quantitative easing, could quickly become mainstream (as nationalisation did last time) as states scramble to maintain growth. The assumption is that Corbyn would benefit as voters turned on the government. But it’s worth recalling that far from damaging his popularity, the 2008 crash initially aided Gordon Brown as voters clung to him as the “rock of stability”. The Tories’ large lead on economic management means that they are well-placed to reassure voters that only they can be trusted to steer the ship through troubled waters. Though their past mockery of Brown for blaming the recession on “global factors” would undoubtedly be used against them. In an attempt to pre-empt a possible downturn, George Osborne has said today: “You don’t know where the next crisis is coming from, where the next shock is going to come from in the world. Britain is a very open economy, probably the most open of the largest economies, and we are affected by what happens, whether it is problems in the euro zone, problems in Asian financial markets.”

Meanwhile, Tom Watson has criticised infrastructure minister Jim O’Neill, recently appointed to oversee Osborne’s “Northern Powerhouse”, after he earlier disregarded concerns over the Chinese economy. Labour’s likely next deputy leader said: “In January, Jim O’Neill, one of [Osborne’s] closest economic advisers, the man he installed in the House of Lords and put in charge of the nation’s infrastructure,dismissed the ‘eternal bears’ who said the Chinese stock market was dangerously overvalued and being propped up by artificial means. He heralded the strength of the Shanghai Composite Index and said he remained ‘bullish on China’. The Shanghai Composite Index has fallen by nearly 30 per cent since June, with potentially serious ramifications for the global economy.”

He added: “The UK is dependent on China for £100bn of infrastructure investment over the next decade. George Osbornehas appointed O’Neill as his commercial secretary with responsibility for the so-called Northern Powerhouse, for Britain’s industrial strategy, and for attracting overseas investment in UK infrastructure. 

“The chancellor should tell us why he thinks a minister who has got it so badly wrong on China has been placed in charge of so much else the country needs to get right.”

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

Content from our partners
Unlocking the potential of a national asset, St Pancras International
Time for Labour to turn the tide on children’s health
How can we deliver better rail journeys for customers?

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU