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Last summer saw two outcomes which were almost entirely unexpected. One was the election of a majority Conservative government in May and the second was the overwhelming Labour leadership victory achieved by Jeremy Corbyn. Both have a huge impact on what we can reasonably expect to happen between now and the next general election in 2020.

The initial Conservative reaction to these two events has been to assume that this means that they will have a clear run in 2020 and probably beyond. Perhaps they will, but five years is a very long time in politics and the situation could look very different by the end of this decade, especially if Labour regroups. How could this come about?

The Corbyn victory has undoubtedly tilted Labour well to the left of where it has been for several decades. There are, however, already signs among Corbynistas of compromise with political realities. On the Right of the party, shock at the outcome of the leadership election is giving way to realisation that the “austerity-lite” policies, which were the hallmark of Labour’s offering running up to the general election, are leading it into oblivion.

The crucial question then is whether some synthesis between the idealism of the Corbyn camp and the pragmatism of the more moderate wing of the party could produce a winning combination, perhaps in time for the next general election. As always, much will turn on economic policy. At the moment the Conservatives appear to be in relatively smooth waters, but there are good reasons for thinking that their economic record could look a lot less lustrous by 2020 than it does now.

The UK economy is extremely unbalanced. Investment as a proportion of GDP is critically low. We have deindustrialised to a point where we cannot pay our way in the world. We have an alarming balance of payments problem. We are living beyond our means and running up debts at both a government and household level. What growth we have is largely consumer-driven, based on ultra-low interest rates and asset inflation. And these are just the problems the UK faces before considering external threats.

It is against this background that the Corbyn anti-austerity policies may, by 2020, have a good deal more traction and appeal than Conservative austerity, especially if the present strategy for reducing the government deficit fails to work. This is very likely to happen, because, rather than being caused by government overspending, the government deficit is in practice more or less the mirror image of the foreign payments deficit, which is going up and not down. In these circumstances, trying to get the government deficit down by cutting expenditure and increasing taxation may well lead to the economy tanking while the deficit stays stubbornly high, producing little or no gain in exchange for a large amount of economic pain.

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