Courtesy Reuters

David Cameron and the London Riots

The Conservative-Liberal Democrat Coalition Takes a Hit

The riots that caused five deaths and millions of dollars in damage in London and several other English cities earlier this month will prove a test for British Prime Minister David Cameron and his one-and-a-half-year-old Conservative-Liberal Democratic administration.

At the start of the summer, Cameron's economic policy was already on shaky ground. In mid-2010, his coalition government had enacted austerity measures aimed at eliminating Britain's budget deficit -- currently more than 150 billion pounds (roughly $248 billion) -- within five years. It introduced a plan to cut public spending by 81 billion pounds ($134 billion) over four years, leading to sharp reductions in welfare benefits and social services in Britain's poorest neighborhoods. The cuts affected social housing benefits, particularly in high-cost London, and policing, with an estimated reduction of 16,000 officers across the country. It is no surprise that most of August's riots took place in areas with high poverty, unemployment, and dependency on welfare, nor that the police struggled to respond to the violence.

The disorder might have derailed Cameron's economic policy for good. In addition to the immediate costs of the riots (damage, theft, and the shutting down of the leisure industry for several days), the resulting uncertainty will discourage investment, hindering the economic growth necessary to reduce the deficit. Meanwhile, Cameron cannot easily walk back from his program. If markets were to decide that the government lacks the resolve to follow through with the cuts, then a rise in debt-servicing costs would become a self-fulfilling prophecy, driving up the deficit and the risk of default.

The riots also laid bare the complex and increasingly tense relationship between Cameron's Conservative Party and the police force, particularly London's Metropolitan Police. Earlier this summer, a controversy over the Rupert Murdoch-owned News of the World hacking into private phones exposed the unseemly relationships among politicians, the police, and the media. Senior police officers had apparently accepted gifts from journalists employed by Murdoch's company, and Cameron had hired a former editor from News of the World as his News of the World employee implicated in the scandal.

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