The British verdict

Tories' majority raises questions about the future

At first sight, the results declared after last week's elections in the United Kingdom are likely to be seen as signalling the end of that country's coalition era. Prime Minister David Cameron's Conservative Party has won enough seats in Parliament to govern on its own. Markets have reacted positively to this development and to the freer hand that the Tories will now have to steer British policy in a more pro-finance direction, free of the constraining influence of their erstwhile Liberal Democrat partners. But this cheer is likely to be short-lived. Britain has emerged from this election with a very high chance of constitutional crises in its future - with consequent negative effects on the City of London and financial markets worldwide, including in India.

The stunning loss of the Labour Party is primarily responsible. It won 232 seats, down 26. The Tories won 331, up 24. This arithmetic could lead some to assume that Labour votes simply swung to the Tories - but that is, in fact, not the story behind what was certainly a complicated election. As Indians know full well, polls and analyses of multi-party first-past-the-post contests can go wrong. What happened here is, in fact, only now becoming clear. First, the Liberal Democrats collapsed, with some of their vote shifting to the Conservatives and some to the left-wing Greens. Second, Mr Cameron ran to the right, promising to be tougher on immigration and Europe - which stopped his flock from deserting to the United Kingdom Independence Party, which won just one seat. Third, Labour held on to its traditional boroughs in urban and ex-industrial England and gained London from the Tories and the Lib-Dems - but lost their foothold in all the aspirational peri-urban constituencies they had gained under Tony Blair. And fourth, the hard-left Scottish National Party (SNP) swept Scotland, which had been till the last election a fortress for Labour as strong as West Bengal had been for India's Left; but this Labour was too wishy-washy for an increasingly left-wing Scotland. Mr Cameron was the default victor, thanks to a weak Liberal Democrat Party in England and an incredibly strong SNP in Scotland. Unsurprisingly, the Tories' vote share barely went up.

The consequences are significant. England and Scotland now have extremely different political and ideological centres of gravity. Mr Cameron has a slender majority - and Britain still runs a genuine Westminster system where ruling parties need their backbenchers on board in order to pass legislation. So Mr Cameron's party will push him to the right, while the SNP is a noisy voice of opposition. Reaching the middle ground will be difficult - especially since there is only one Scottish member of Parliament in the Tory ranks! In other words, barely a few months after a historic referendum kept it in the Union, Scotland has voted like a different country. The threat of constitutional crisis looms again.

And, finally, there is the question of Europe. Mr Cameron will be forced by his Euro-sceptic backbenchers to keep his promise to hold an "in or out" referendum on the European Union by the end of 2017. Currently, only 30-35 per cent of Britain wants to leave. But as the Scottish referendum showed, a campaign can take those numbers up quickly. The markets, currently pleased, may grow increasingly disturbed as the threat of "Brexit" grows. The big impact on India: increased volatility in fund flows. The Indian markets had better be prepared.