Even if Jeremy Corbyn loses, we’re heading for an era of political chaos

Tomorrow, Jeremy Corbyn might become leader of the Labour party.

That's an outcome that even the most obstinate contrarian would have been hard-pushed to predict just a few short months ago.

It's not over yet. Maybe the polls will be wrong (though given their performance at the last election, surely not!).

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But whatever happens, the very fact that Corbyn a proponent of a sort of politics we haven't seen in this country since the 1970s could get this far shows that politics is starting to matter again.

And he's far from being the only wild card in the deck

Gosh, that was a short generation

Even if Jeremy Corbyn doesn't become Labour leader, there's plenty of opportunity for political upheaval in the next few years centred largely on Britain's identity as a nation.

Last September, Scotland voted to stay in the UK by a comfortable margin of more than 10%. The following day, Alex Salmond who had described the referendum as a "once in a generation" event resigned as leader of the Scottish National Party (SNP).

However, it's proven a pyrrhic victory for those who want Scotland to remain part of the UK. In May's general election, the SNP pretty much swept the board, winning 56 out of 59 seats. Unsurprisingly, it seems that once in a generation wasn't a binding promise.

With the SNP hinting that there could be a new vote, a recent poll suggests that more than half of the people living in Scotland would choose independence 53% versus 44%.

It's hard to explain exactly why the Yes' camp has surged so much after a defeat that should have set the separatist argument back. In Canada it took 15 years for Quebec to hold a second referendum, and there hasn't been a third since the 1995 vote even though it was extremely close. Meanwhile, the plunge in oil prices has destroyed a key economic argument of the SNP, yet this doesn't seem to have been absorbed by voters.

My guess is that the further devolution of power to Scotland agreed in the run-up to the referendum has played a role. So many things are now decided at Holyrood, including more and more tax-changing powers, that many voters think they might as well go the whole hog especially if Scotland will be able to keep the pound (and the implicit promise of a Bank of England bailout if things go wrong).

At the other end, the decision to exclude Scottish (and Welsh) MPs from voting on English issues (Evel', or English Votes for English Laws), which the government is almost certain to introduce, is another step towards independence.

Of course, it's also part of the general shift towards populism that has brought us Corbyn. Whatever the reason, the SNP looks set to include another vote as part of its manifesto for the 2016 Holyrood elections and it could use Evel or an exit from the European Union.

Don't bet that we won't vote to leave Europe

Which takes us to the next big potential political game-changer the vote on Europe. A poll in the Mail last week which used the new stay/leave' question, rather than the yes/no' one suggests that a majority would vote to leave.

This could be just a rogue poll, of course. But it shows that those who assume the status quo will hold shouldn't be so confident. Particularly as David Cameron has so far not had much success in his efforts to change the terms of UK membership.

While the possibility of Britain leaving could focus the minds of EU leaders, it looks as though they are either happy to call Cameron's bluff, or are just sick of the UK altogether (or maybe they're just too distracted by internal havoc over Greece and the rest to bother with Britain).

The refugee and immigration crisis could also be boosting support for the leave' vote. In any case, with many Conservative MPs demanding tough restrictions on what ministers can say during the campaign, and with the possibility of an anti-Europe Corbyn leading Labour, there is the potential for the polls to shift further.

Politics matters again

There was a point, before the financial crisis, when investors could arguably put politics low on their list of things to worry about. A group of broadly similar politicians squabbled for power, while central bankers did little bar shifting interest rates up or down by a quarter of a point occasionally.

That's changed. Regardless of your view on both of these issues, they'll have an impact. Scotland leaving the UK could have immense short-term costs, particularly for Scotland. As we pointed out during the Scottish referendum vote last year, when the Czech Republic and Slovakia split, the currency union was supposed to last for six months in the end it collapsed within weeks.

The rest of Britain' might see little risk from Scotland leaving. And there's no doubt that the economic threat is much greater for Scotland. But if the UK remains stuck with any potential bailout bill for Scotland, then that will have a knock-on effect on bonds, sterling and the rest.

Meanwhile, again, regardless of your views on Europe, the short-term disruption and uncertainty would be immense, especially if the other countries decide to make things as difficult as possible.

Certainly if the markets perceive either of these events as a risk they could panic and start selling gilts. Indeed, after the independence referendum saw a sudden surge to the "Yes" camp last year, the value of the pound dropped expect history to repeat itself if the vote is close.

How to protect your wealth

Assets that could be hit by the coming political uncertainty and fallout include property, gilts and sterling. This is yet another reason to avoid overpriced London housing.

My colleague John Stepek looks at the issue of political instability and the rise of the new populism in more depth in this week's issue of MoneyWeek magazine, out today.

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