The Trump effect

By Heather Jameson | 30 April 2024

Anyone who works in local government knows democracy can be fickle and somewhat unpredictable – utterly confounding, even. In national politics, the return of former Prime Minister Lord Cameron, appointed last year as foreign secretary, came as a bolt from the blue, while local defections, defenestrations and surprise returns all add to the colour in local politics.

Internationally, former President Donald Trump’s rise back to the top of US politics has been less of a bolt from the blue and more of a slow crawl through the legal system. Despite numerous court cases, a refusal to accept defeat at the last election and encouraging the 6 January uprising that saw protesters storm the US Capitol Building, there is a good chance Trump could return as leader of the USA.

Capitol Hill may be a long way from our town halls here in the UK, but The MJ set out to ask what a Trump election victory, should it happen, could mean as it reverberates through global politics down to a local level.

None of the potential impacts – a change in the tone of democratic debate, geo-political uncertainty or shifts in global funding and investment – are solely the preserve of one individual but, be it cause or effect, a second victory for Trump will inevitably make a mark.

The most obvious impact of the first Trump presidency was the rapid shift in political discourse, the results of which can still be felt. Fake news, social media rants and political mudslinging are not the sole preserve of Trumpism, but by campaigning on a distrust of politicians, the former president has nurtured distrust and disrespect to further his own career.

This time round, we could see a UK General Election run against a backdrop of a US election with a volatile political narrative, while local politicians face rising tensions in their own areas. There may be no respite from the polarisation of politics and the angry debate played out on social media. The gloves will remain firmly off.

Former Kensington and Chelsea LBC chief executive Barry Quirk has been an avid US political enthusiast. He told The MJ it is unlikely we would ever have a demagogue like Trump in the UK ‘because the parliamentary system and the party system constrains them… they’re always looking over their shoulders about getting thrown out’.

While Boris Johnson was a populist Prime Minister, he rose to the top of politics through charismatic leadership, Quirk claimed, rather than demagoguery. The British public, too, differ from the US population, where 24% of Americans believe in QAnon and 45% of the public were anti-vaxxers. But it was Trump’s direct connection to the public that was a game-changer for politics.

‘The big thing that Trump has shown is that, with modern communication tools that are at everyone’s disposal, anyone with a lot of push and a lot of character can actually create their own party and can come from zero to being in control in a very short space of time,’ Quirk said.

France’s president Macron, he suggested, is the best example of that. In the UK, Nigel Farage could stage a similar rise, by-passing traditional political structures to gain power by directly appealing to the public, but the British political system makes it harder.

Then there is the geopolitics. In recent decades, the West has benefited from a ‘peace dividend’, with low spending on defence as a result. But with rising global uncertainty, wars in Ukraine and Gaza and the threats from China and Russia, peace is no longer guaranteed.

Trump’s insistence that the US should shoulder less of the burden of Nato defence spending is already having an impact, with UK Prime Minister Rishi Sunak announcing last week that he would raise defence spending to 2.5% of GDP by 2030 – but it is still low.

Prior to the announcement, Institute for Fiscal Studies figures showed 8% of public service spending was going on defence. In the last year of the Blair government, that was 17%. Speaking before the Prime Minister’s recent defence announcement, Quirk told The MJ: ‘We’ve been benefiting from this peace dividend, being able to reduce our defence expenditure. Well, we are probably going to have to nearly double it, particularly if Trump gets in… his big thing is: “Why are we paying for European wars?” So he insists Europe pays more.’

With defence and health spending rising, he asked: ‘Where is it going to come from?’ Education spending – thus far a protected budget – could fall due to the falling number of children, but overall unprotected spending will again be vulnerable.

‘I do think that the biggest impact of Trump will be this super-boost given to defence expenditure,’ he said.

If there is less money for public services, the UK will need to face the unpalatable option of raising tax or growing the economy. While local government has had limited success – and some very high-profile failures – at commercial investments, the great hope for riding out the austerity storm is large-scale economic growth to boost local economies and the national GDP.

Former chief executive of Homes England Nick Walkley is now UK president of global real estate firm Avison Young. He asked The MJ: ‘If we are going through a period of instability and deep insularity, which is what Trumpism is about… where does capital come from and what are the issues with it?

‘The extent to which government will have to look to the big stores of capital in the UK, which are pension funds, is significant.’

He suggested pension fund investment in UK developments will, conversely, also need to diversify abroad in an attempt to manage risk for pension holders.

For now, he said: ‘Middle East cash is back with a vengeance… are we ready to shape opportunities for the scale that sort of capital is interested in?’

Much the same as the early 2000s saw the investment of money from Russian oligarchs, a new wave of cash in an unstable world could bring its own problems. Expect investment money from China and India in the future.

Former Labour adviser turned founder of consultancy Metrodynamics, Ben Lucas, suggested there will be trade and investment consequences. ‘A more protectionist US could be bad for some of Britain’s growth sectors,’ he said.

Labour’s Green Prosperity Plan – the famed £28bn investment plan that has been rolled back in the face of financial constraints – is based on the Biden Government’s badly-named Inflation Reduction Act. Lucas said: ‘Basing an industrial strategy on a US model that would have just been rejected by Trump could be challenging.’

But on the plus side, the brain drain we are seeing of green industrial expertise going to the US could help the UK to exploit green growth.

Walkley told The MJ: ‘Levelling up, for all its grand ambition, has just led to quiet small-scale short-term interventions. And what capital needs is large scale long-term. There’s a sort of inherent contradiction between the two.’

‘And how many local authorities have got the capacity and the risk appetite to get into that sort of stuff at the moment?’

Ultimately, he added, that while Trumpism may not be everyone’s political ideal: ‘International money markets will just find a way if there is an opportunity… there is a difference between political noise and financial reality.’

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