SOUND AND FURY

Yesterday, Gordon Brown stood outside 10 Downing Street with his cabinet and announced that a General Election will be held on 6 May. He reminded his audience of the pledge - supported by the Tories - to halve the deficit within the next four years. Alongside this issue, all others sink into relevance.

John Lanchester, writing in the LRB, has spelled out what this is likely to mean. If the Treasury's forecast of 2.75% growth is correct, the cuts required during the next Parliament correspond to 11% of public spending. If the government agrees to protect frontline health and education services and international development, other departments will need to cut 16% of their funding. According to the Institute of Fiscal Studies, this would equate to liquidating the army, withholding one third of the Government's annual grant to Network Rail, the closure of most courts and 50% of prisons, and a savage bludgeoning of welfare benefits and social care services.

If, as many economists believe, the Treasury's estimates are overly optimistic and Barclays' forecast of 1.75% growth is nearer the mark, the Government will have to find a further £66bn over and above the £57bn cuts already announced by Alastair Darling. This makes Thatcher's cuts - which merely reduced many areas of public spending to zero growth - or even the cuts imposed by Callaghan and Healey after the IMF bail-out pale into insignificance. Cuts of this magnitude will be unacceptable to the public, and virtually impossible for a government with a slim majority to force through.

Nevertheless, the government (and the public) will be held to ransom by the international bond markets. They will accept nothing less than draconian public spending cuts, and will not tolerate increases in inflation (which would wipe out the value of the deficit - good for the country's bank balance, but bad for the markets which hold and trade in government debt).

The government - whether Labour, Tory or coalition - fears the reaction of the markets far more than that of Unions or the general public. More than at any time in my life, our current situation exposes the sham of parliamentary democracy. Neither the markets nor the banks will mind too much who wins the election, because they know that they can dictate the financial agenda. To paraphrase the old graffito from the 70s, "Vote John Varley - cut out the middle-man."

As the resurgent Keynesians tell us, the most pressing question occupying the minds of the new Chancellor will be (a) when the first cuts should materialise, (b) how much should be cut, and (c) how high inflation can go without sparking a buyers' strike in securities. If services are cut too quickly, the economy could relapse into recession, pushing asset prices down further and, hence, pushing up debt; if they are cut too slowly, the markets will stop trading. If they are too draconian, there will be a risk of mass public disorder and industrial action. Lanchester predicts that any new government will increase VAT, reset inflation to 4% (which must also mean an increase in interest rates), and ratchet up public spending cuts in April 2011. The scale of those cuts is still too extreme to countenance.

As an aside, it seems that the more hollow the contest, the more exciting the spectacle. Watching the election coverage on May 6th and 7th will be rather like (forgive me...) watching Bangladesh chasing 300 on a flat pitch in the second innings of a 50-over match against Zimbabwe. Both teams are hopeless, you don't really care about or take seriously either side - but somehow there is a thrill in the chase. I also anticipate that I will suspend much reason and rationality and be surprisingly tribal on the night (though, of course, I won't actually vote for Labour).

I also expect a half-hearted campaign from both Labour and the Tories. After all, who would want to win this election? Whoever wins it will surely lose the next general election. By then, the political complexion of the country will have changed (though the pain will barely have eased). Whether we will find socialism or slip into barbarism, nobody can say. We sure as hell won't find out during this election campaign.