Britain must be saved from the financial abyss

A few months ago, Alistair Darling was asked how long he thought his government could continue to borrow £600 million a day. Might creditors one day refuse? The Chancellor gave an oblique reply. ‘When you walk over ice, you never know it is too thin — until you fall through.’ He said no more, but his message came across. If the bottom falls out of the British economy, it will do so instantly and dramatically. There will be no warning.

For some time now, Gordon Brown’s government has been walking on the thinnest of ice. But it has been helped, ironically, by the widespread expectation of its electoral annihilation. The money markets — which decide daily whether to extend the financial lifeline upon which the Prime Minister now depends — had priced in a clear Tory victory. Pension funds and foreign investors were banking on David Cameron winning, and being obliged to restore fiscal sanity.

Over the last fortnight, this expectation has been shattered. The slump in the Tory lead to just two percentage points in a YouGov poll last weekend was the tipping point: sterling nosedived the very next day. But despite what Tory spin doctors say, the fear is not about a Labour victory. Even Mr Brown would be forced to repair the damage he has wreaked, if he had five more years in power. The nightmare haunting the markets is of a hung parliament, the possibility of a second (or third) election, and a country in fiscal meltdown with no one properly in charge.

It has been so long since Britain has seen a hung parliament that it has faded from political memory. Politicians and the media think in binary terms, of victory or defeat — yet the Westminster system is capable of delivering neither. Citigroup has published a graph (printed opposite) alongside its economic research: most polls coming out now suggest that the Tories would form a minority government.