Here’s why the new UK government may struggle with its pledges

The Conservatives’ surprise victory in the U.K. elections was won on the back of a number of promises that may come back to haunt them.

At least they didn’t get them carved in stone (yes, really), like woebegone former Labour Party leader Ed Miliband. Yet some of the center-right Conservative party’s promises will be difficult to keep—and here we look at why.

The relaxation of austerity in the run-up to the election has reduced the rate of deficit reduction already—and an increasing number of economists believe that the government will struggle to hit its target of eliminating the deficit by the next election, in 2020.

“They will be unable to deliver serious austerity until 2017 at the very earliest, and by then they will be starting to think about the next election,” Holger Schmieding, chief economist at Berenberg, the German bank, told CNBC.

“It will be very politically difficult to implement big cuts.”

Migrant benefits

One of the U.K.’s biggest battles with the European Union is over whether economic migrants to the country should be able to claim welfare money like child benefit or tax credits.

Free movement of people is a cornerstone of the 28-country union and noises from the rest of the EU about U.K. concerns aren’t exactly encouraging. Wolfgang Schaeuble, the irascible German finance minister, decisively dampened British hopes for a quick resolution to the benefits and other issues on Tuesday, in comments to reporters on the margins of an EU regular meeting.
“The realistic assessment of the German government is that it is not at all certain that this can be achieved quickly,” he said, according to the Financial Times newspaper.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam