TIOL - COB( WEB) - 922
MAY 30, 2024

By Shailendra Kumar, Founder Editor

FOR the institution of democracy - especially the one which carries the symptoms of 'high fever' and political haemorrhage for long, elections are indeed a good cure but not for all the ills! And British Prime Minister Rishi Sunak, cannot be faulted for his febrile decision to roll the dice for snap elections on July 4! Was he totally compos mentis? Though it may look impulsive and illogical to political pundits in London as it was due only early next year but the numbers on the rolled dice revealed that it was perhaps for the best possible out of the worst prospects his internally-bleeding and lugubriously-fractured Conservative Party (also known as Tories) stands today. Brexit vote in 2016 was definitely the apogee of its popularity - sweeping even the strongholds of the Labour Party. But it later failed to manage the tide of support and awfully messed up with the mandate. Since the COVID-19 days it has been on a slide! Besides the episodes of ill-management of the healthcare services a la NHS (National Healthcare Services) during the lockdown, it lost its trousers in the 'Partygate' scandal over official soirée! Oh fiddle-de-dee! Then Prime Minister Boris Johnson, kept fibbing about the piñata with panache but was later indicted by a parliamentary committee and he lost the chair, which turned into a musical chair for a couple of new faces till it came to rest with Sunak! Former Chancellor Sunak assumed his leadership role in 2022 but the fratricidal forces within the party and also some external fateful events did not let him leisurely sink into the coveted chair!

First came the Russian invasion of Ukraine which compelled the West, including Britain, to go for a barrage of sanctions along with huge military aid to Ukraine. Banning imports of Russian oil and gas was easy but managing the aftershocks to energy prices was just too humongous for all Western leaders! Quickly sprang up the demonic animal of inflation which surged along the curve up to 11.1% for Britain. With furlough gone and no let-up in tax burden, it heaped miseries on the average Briton to manage the soaring cost of living. The macabre effect of high consumer and energy prices provoked derision and outrage against the Sunak government. What further eroded his economic credentials was the poor performance of the beleaguered economy - dismal economic growth, perilously declining productivity since the Brexit days and the rising joblessness!

To add to his woes came up the issue of unchecked immigration. Tories have been allergic to the influx of African immigrants risking their lives in small boats and crossing the English Channels in hordes. To deal with it, Sunak sidelined the Europeans' fetish for human rights and entered into a contract with Rwanda which agreed to host deported les-miserables for a price! A new law was also made but the court found it repugnant to some of the basic principles of human rights laws. Sunak literally ran out of road! But then sprang up the economic 'cavalry' on the horizon - laggard economic growth picked up, inflation gradually dropped to 2.3% and real wages fortunately went up. Since Sunak cannot afford to cut taxes by autumn in view of high interest rates and mounting public debts, he saw the best salvation option in the latest bright-but-less-shiny economic indicators and took a plunge for July 4. Unbeknown to many Tory MPs! Sunak knows for sure that Tories are going to be ignominiously routed if one goes by the 20 percentage point difference in all poll-surveys and also the verdict in the recently-held local elections but he is quite sanguine that the brightening economic performance and his slogan - 'stick-to-the-plan' - may blunt the intensity of annihilation of his party to some extent!

Let's now boogle to the Indian element in the complicated electoral concoction. Indian-origin voters constitute close to two million - the largest among the immigrant communities but they hardly form a homogenous bloc! Though both the Tories and the Labour have their own slivers of support-base among them but a good chunk rallies behind the group of swing voters - good for wooing by both the parties. Some poll-surveys reveal that Labour Party of Sir Keir Starmer enjoys a clear edge over the Tories. However, surveys also indicate that the Indian diaspora stands heavily fragmented - better-educated and wealthier ones are more tilted towards the Tories whereas younger lots along with the poorer and those without degrees favour the Labour. The earlier generation of immigrants and their children vote for the Labour and the new crops vote for the Tories. In fact, the Indiann diaspora is also split along the religious line - Muslims and Sikhs tend to vote for the Labour whereas Hindus and Christians vote for the Conservatives! On the issue of Brexit, about 70% of those who initially supported, now oppose the divorce. Interestingly, a major chunk of Indian diaspora, as per one study, does not care much about how much importance Westminster gives to its trade deal with India or diplomatic relations with New Delhi.

The second Indian element is the India-UK Free Trade Agreement and a bilateral investment treaty. Both the countries have been negotiating details of the FTA and the investment treaty for the past three years. There are 26 chapters in the proposed FTA and after 14 rounds of jaw-jaw and tut-tut, as many as 24 chapters are speculated to have been locked. The remaining two chapters involve some of the hot-button issues such as goods, services, rules of origin, market access for certain goods at nil Customs duty; mobility of skilled professionals; a share in procurement by governments in India; visas, social security and pharmaceuticals. British negotiators have been demanding 'intaxicating' concessional duty regime for scotch whiskey, EVs, chocolates, lamb meat, some confectionary items and some GI products like cheese. India has been insisting on visas for its professionals and a favourable social security agreement. Sunak Government did make last-gasp attempt to conclude the agreement but obduracy of his bureaucrats created many bumps to further delay it. Secondly, the UK side did not realise that India represents one of the brightest global destinations for future economic growth - much faster for its trade than its other FTAs like the one with Australia, may eventually yield! Another bone of contention between them were the Ayurvedic products. Since some of the common ingredients used in Ayurvedic goods are either banned or restricted items in the UK, they were kept aside for a separate agreement.

Having peskily realised that the Sunak government negotiators were not willing to cede their grounds, India decided to resume talks only after a new government assumes office in London during Modi 3.0! In this context, India had a meeting with Labour Party's shadow business secretary Jonathan Reynolds in Delhi. As per my inputs, India has received much more encouraging response from the Labour than the Tories. Hence, as soon as Sir Starmer Government comes into power, India hopes to seal the deal by the end of 2024. Similarly, the bilateral investment treaty which got stuck in the tunnel over the issue of dispute resolution mechanism, will also be sorted out favourably. India's stand is that UK investors should first exhaust the regular judicial remedies before they resort to international arbitration. The UK's view was that it consumes too much time in India to settle legal disputes through conventional routes and hence, international arbitration should have a precedence over other alternatives. It is believed in the power corridors of New Delhi that the Labour government would settle this issue more favourably for India!

In a nutshell, unlike the Indian elections where a cocktail of issues like religion, reservation and political violence dominates the political discourse during campaigns, economy is going to be the real battleground in the UK. Taxation is going to be one of the major planks for the Labour Party. Tax burden in Britain is presently the highest since WW-II after public spending was ratcheted up during the Covid years. Labour Party has vowed not to spike tax rates of income tax and corporate tax. It would instead levy VAT on private school fees and tax foreign income of British residents who enjoy non-domiciled status. Interestingly, one fact that comes to the fore is that both the parties have pledged not to hike the tax rate but the larger question is - how they are going to improve public services and fiscal health of the country? Secondly, Labour Party wants to invest in infrastructure but at the same time, has pledged not to resort to the borrowing rule for extravagant debts. In this process, it has euthanised its plan to borrow up to USD 28 bn pounds a year for green transition of the economy. Tories have also dropped their plan to decarbonise the power sector in a haste and achieve net-zero by 2035 by switching over to EVs. Sunak's new target is 2050.

Briefly, major issues to fight the electoral battles are going to be taxes, public spending, green transition and security concerns which nudged Sunak to say that if he is voted back into power, he would make military and civil service mandatory for the 18-year-olds! And his National Service call has sent cortisol levels of Gen Z soaring and meme factories into overdrive. Although the predictable outcome of the July polls favours the Labour but it is also going to be a throne of thorns - too many scaringly sticky issues along with high expectations of the Britons to see major jump in their living standards which have been on decline since the Financial Crisis in 2007-09. Indeed, interesting time lies ahead for both the UK as well as India! Let's also batten down our hatches ahead of a stormy future for the planet! Ciao!