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After a Year of Revolt, what’s in store for 2017?

December 31st, 2016

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There might well be scares but there won’t be shocks

Few would have predicted twelve months ago that Donald Trump would be about to be inaugurated, that Theresa May would be prime minister and that Paul Nuttall would be leader of UKIP. Those who did should have cashed in nicely. There were straws in the wind for all of these (though most would have anticipated a change of UKIP leader after a Remain win, not a Leave), but the odds were still strongly against.

Can 2017 provide even more shocks and surprises? After the last two years, it’d be foolhardy to rule it out but my guess would be that the narrative of year will be of a mainstream fightback under pressure (though this narrative won’t necessarily be correct: the local trends are likely to remain towards the political insurgents; it’s just that this year’s elections have them starting further back).

Domestically, politics is Brexit. We’ll get the Supreme Court ruling next month on whether the government can trigger Article 50 without the need to go to parliament. After the strong ruling in the High Court in the applicant’s favour, I’d be surprised if the Supreme Court overturned that decision (although as said here, I think there are strong grounds for doing so). That’s going to mean the early months being dominated by the triggering legislation, in order for Theresa May to hit her end-of-March deadline.

My expectation is that parliament will give the government what it wants – a clean Act not tying its hands with conditions. There probably aren’t the numbers in the Commons to force amendments through and the Lords are unlikely to risk more than token opposition (which is to say that they’ll back down when the Commons reverses any amendments they pass). However, there’s a chance they won’t, in which case there is a serious chance of a May 2017 election, particularly given that Corbyn has said he’d support a dissolution motion were one brought. Given that Corbyn, the PLP and the government might all have reason to want an early election, and that the critical time for the Brexit votes ties in with dates when an election would need to be called to coincide with the local elections, I’d put that chance at about 1 in 3 – though the best odds of 7/4 don’t offer value.

If there is an election, the secondary markets however might do. A Labour leadership election would be likely to follow, where Clive Lewis (10/1) might be worth a punt (with the added advantage that if there’s not an election, the bet still runs). ‘Who governs?’ elections can go wrong for governments but I doubt one would if called because Labour and Lib Dem peers were frustrating Brexit (which is one reason I don’t think they will), and with Corbyn still as Labour leader.

More likely, in the absence of an election, is that the Tory lead will decline as internal divisions over Brexit make themselves felt and the process itself struggles onwards against both domestic and EU opposition. In the ‘Next cabinet minister out’, the Three Brexiteers are top-priced but I’d look elsewhere. As a rule, the payouts in this market are hard to predict months in advance and come about due to incidents of the moment. My tip would be to take your pick of anyone 20/1 and up. What I wouldn’t expect – even in the event of a Con win after a general election – is a major reshuffle. May made huge changes on coming to office and is unlikely to want to repeat that only nine months on.

If there’s not an election, the other domestic betting question is about Corbyn’s longevity as leader: will there be another challenge and will he see the year out? The Unite leadership contest is to some extent a proxy but union elections have notoriously low turnouts and with both the status quo and Momentum-type activists going for him, McClusky should be secure. If he does lose, however, I wouldn’t expect Corbyn to see the year out. Even if he wins, the tide is now probably flowing against the Labour leader. However, as they found last year, the capacity of a Labour leader determined to cling on is immense and were his opponents to lose a second challenge, it’d damage the credibility of a third in 2018 or 2019. Because it’s now a one-shot option, and because a general election is unlikely in 2018, I think Corbyn will see the year out.

Internationally, the year starts with Trump’s inauguration. This will undoubtedly mark a change in style in the White House and in policy too – though quite where his priorities will lie are anyone’s guess. A leader can only fight on so many fronts; is it the Wall, Healthcare, foreign policy or something else? Or will he simply lead an incoherent administration shouting about everything but achieving very little? You can make a good case either way. He ought to go on healthcare, where he at least has congressional support.

In Europe, the course for this year’s elections is probably already set: centre-right administrations will win weak mandates in the Netherlands, France and Germany against populist insurgents. This will then be wrongly credited as a ‘fightback’, after Brexit and Trump. In reality, all three elections will see the mainstream retreat locally. All the same, Wilders, Le Pen and the AfD will end the year with lots of votes but no power.

All of which is to count without Black Swans. Even a series of terrorist attacks is unlikely to swing the European results – the Netherlands votes as soon as March; Fillon would play sufficiently to the same law, order and culture market as Le Pen to see her off; while the AfD have become too extreme to capitalise effectively. Brexit also seems to have consolidated support for the EU among Europeans; 2017 is unlikely to change that dynamic.

The other big Black Swan risk – a major economic downturn, perhaps induced from China – is real but would take time to feed through to political consequences. One to watch for by 2020 rather than 2017.

All in all, after the shocks of 2015 and 2016, we should see a quiet 2017. Famous last words.

David Herdson