How is politics realigning? A political update from David Gauke

20 May 2021

Asset ManagementAsset ManagementAsset Management MOMBrexitculturaldiversityEconomicFinancial servicesleave coalitionParty Politicsremote workingUK economy

Speaker: David Gauke, formerly Theresa May’s Lord Chancellor, and now Head of Public Policy at Macfarlanes


  • Party politics is changing, and we expect continued shifts in the UK as votes increasingly vote in accordance with cultural values over economic factors.
  • The Conservative party remain in a strong position with a divided opposition; however, issues are bubbling under the surface.
  • Brexit and relations with the EU will remain bumpy for political reasons on either side, and the Northern Ireland protocol will continue to be a fundamental problem.
  • Levelling up will be a key concern for the government in the months ahead, and questions are being raised as to how they will effectively live up to their manifesto promises. 

Discussion Summary:

Over the last 12 months it has become very clear that party politics is changing, and we are seeing shifts in voter behaviour across the globe. Traditionally, votes were driven by economic security: in the UK, wealthier individuals typically voted for the Conservatives, whereas those on lower incomes were drawn to the Labour party. But today, voter behaviour is instead increasingly based on cultural values.

Social scientists link this shift to diversity and demographics, finding densely populated, diverse areas with high levels of graduates voting in one direction, while rural, sparsely populated areas typical inhabited by white populations vote differently. This is why the Conservatives have been able to progress in the red wall: these areas are poorer than traditional Tory constituencies but are culturally more Conservative and found themselves culturally alienated from the centre left rhetoric on liberal cultural issues and identity politics. So far, the Conservative party has been less impacted by this shift, however this is a trend to watch in the coming years in prosperous but diverse communities such as the home counties. With the rise of remote working, we will likely see a racially diverse range of millennial graduates relocating from London to the home counties and commuter areas in Kent, Sussex, Surrey, Hampshire, and Berkshire. This demographic shift will likely result in economic and political shifts within those areas.

This parallels voter behaviour in US states such as Virginia and West Virginia. West Virginia is a coal mining state with a very rural and low-income population which traditionally voted Democrat, while Virginia, a suburban, middle-class area with many high-income graduates commuting into DC, tended to be solidly Republican. Voting behaviour in these two states has now switched: West Virginia is one of the most Republican, pro-Trump states in the US, while Virginia has voted Democrat for several presidential elections.

At present, Boris Johnson and the Conservative party are in a very strong position. Brexit accelerated the shift to cultural politics, with the referendum votes defying party politics, however in its wake the Conservative party have hoovered up the leave coalition. In addition to this, the Conservatives are facing a divided opposition. Labour’s strategy is currently unclear while smaller parties such as the Liberal Democrats and Green Party are posing more of a risk to Labour than the Conservatives. Meanwhile, since Covid-19, there has been a realignment of Tory economic policies: many of which are not traditionally Conservative and more distributive.

Brexit will continue to be important and the relationship between the UK and the EU will continue to be bumpy. There is political imperative on both sides to maintain some tension: while the Conservatives will be looking to appease leave voters and show strength, the EU equally do not want Brexit to be a success.

The key example of this is the Northern Ireland protocol, which continues to be a fundamental problem. Although denying he has done so, Boris Johnson has effectively built a border in the Irish Sea, which has caused huge problems with the unionist and loyalist communities in Northern Ireland. However, the UK government fear that any alignment deal with the EU which could resolve this could also impact future potential free trade agreements with the US and Australia and are instead pushing for an equivalence deal more like the EU’s deal with New Zealand. There may be scope for a deal on agriculture, which would resolve many issues and allow for a softer touch on some boarder checks but expect tension to remain.

Similarly in Financial Services, upon signing the agreement on Christmas Eve, the Government indicated an equivalence deal resolving issues around financial services would be done by March, however this did not transpire. Instead, the government is now considering what regulatory changes they can pursue with their post-Brexit freedoms which could benefit UK financial services, and also opportunities for the UK’s financial services to compete on a world scale through innovative avenues like FinTech.

In England, the electoral battleground is currently being fought in the Midlands and the North. These voters are not interested in big business or international policy but are more interventionists. In simplistic terms, these want the government to take a bigger role in our economy. Therefore, the governments levelling up policy will be crucial here, but this will be expensive. A key focus for this should be better attracting ambitious and talented people to live and work in the north of England.

The UK Economy is bouncing back from Covid-19 faster than anticipated, but while we are likely over the worst, public finances remain under pressure. The Chancellor is facing many considerable spending pressures; however the Prime Minister is somebody who likes to say yes, and will want to keep spending money. This will likely cause tension between Number 10 Number 11 over the months ahead. As a result, the Government will likely turn to populist routes of fundraising, targeting businesses and the wealthy. In March we saw a big increase in corporation tax, and this could be followed by changes to capital gains tax.