Would really like to get back to macro, as some interesting things have been happening, but there are just too many compelling issues following GE2017 to talk about first.
The GE2017 result left the Conservatives in a position that chess players call a zugswang, which means whatever you do makes your position worse. They needed to turn to the DUP to get an overall majority, which leaves them with a secure hold on power. But that move in itself will lose them some popularity, kills their ‘coalition of chaos’ charge, and runs the risk of damaging Northern Ireland. The Good Friday agreement says that the sovereign should exercise power with “rigorous impartiality”. It will be up to the DUP to persuade Sinn Fein that all they are getting from the government is extra money for Northern Ireland. So to hold on to power, the Conservatives put the Northern Ireland peace process in jeopardy and give a gift to Labour.
The Conservatives will not fight another election with May as their leader. Their MPs, whatever they may say in public, are angry at her incompetence in running a campaign, putting together a manifesto, responding to the press, and almost everything else. The longer she stays in post, the longer the memory of that dismal campaign lingers and the more the brand gets tainted. However an election to replace her will reopen the split over Brexit which could tear the party apart.
Here is a worst case scenario. After the referendum, the Remain half of the party were in shock, and so they allowed May to define what Brexit meant. She did it in such a way as to ensure Hard Brexit, which will inflict considerable damage on the economy. Remain MPs felt they had no way of resisting that (few tried), but as Ruth Davidson made clear in any election in the near future they will be less passive, trying to elect one of their own who will perhaps keep the UK in the EEA (a Norway type deal), and certainly stay in the customs union. Leave MPs will do everything they can to stop that, and it is difficult to see this time their candidate mysteriously withdrawing before the membership are consulted. The Leave membership, with the help of the press, will choose the Leave candidate. Ruth Davidson might then declare independence from the main party.
It could be a terrible mess, spread out over time. It is a contest which will allow, with delicious irony, Corbyn to describe the Conservatives as too hopelessly divided to govern. Furthermore if they hold the contest while the EU negotiations are going on, Labour will justly accuse them of wasting precious time. But if they leave any contest until after the A50 negotiations have ended, the less time a new leader has to improve the Conservative brand, particularly when their majority makes them look powerless and ineffectual. It is a zugzwang.
The same applies to how they turn their fortunes around. The obvious move is to abandon austerity. The agreement with the DUP and other factors mean that the existing deficit targets will not be hit, so turning the deficit into surplus appears a distant prospect. But ending austerity in the mind of the voter means spending more on the NHS and schools. It should also mean reversing the cuts to in work benefits. However to, for example, match Labour’s spending commitments with some attractive alternatives of their own without raising taxes will blow the deficit. That would destroy the ‘we are competent because we cut the deficit’ line so carefully built up over seven years. To raise taxes will damage their core vote. Once again, a zugzwang.
You can add immigration. Fail to meet their target once again, and their credibility on this issue will be destroyed, but try meeting it and the economy is in serious trouble. Of course none of this means that the Conservative are bound to lose the next election. As a Conservative Prime minister once said, events dear boy, events. But for the party it means the liklihood that things will get worse before possibly getting better.