In 2010, the Conservatives and Liberal Democrats formed the first coalition government in the UK since the second world war. This government structure is common in mainland Europe, but a more unusual circumstance for Westminster.
The election on 7 May is likely to see another coalition formed as polls suggest that it is unlikely any one party will secure the necessary 326 seats required to form a majority government. At the time of writing the two main parties – the Conservatives and Labour – are each polling at about one third of the vote, with the remaining third comprising the smaller parties.
Now that campaigning is in full swing, it is important that voters do not get caught up in the personal attacks for which politicians are infamous, but focus on the policies that each party puts forward, and how these policies will impact the UK economy.
Salman Ahmed, fixed income strategist at Lombard Odier, says, “The UK recovery has been quite strong compared to other advanced economies and has really picked up momentum over the past two years. It is apparent that the mix of easy fiscal and monetary policy deployed in the aftermath of the 2008/09 crisis worked for the economy.”
Productivity, measured by purchasing power parity (PPP), is a key indicator of the health of an economy and the standard of living. According to the Office for National Statistics (ONS), output per worker was up by 0.5 per cent between the third and fourth quarter of 2014, meaning that the average UK citizen is slightly better off than they were before the last election, though still 1.2 per cent worse off than they were before the recession.
UK growth for 2014 was recently revised upwards to 2.8 per cent; the results of the election have the potential to impact the sustainability of this growth rate throughout 2015 and beyond.
However, it is not good news across the board for the UK economy – the growth experienced in recent years has come at a cost. The current account deficit rose from £76.7bn in 2013 to £97.9bn in 2014 – an increase equivalent to 5.5 per cent of national income. This is the largest deficit since records began in 1948 and goes directly against George Osborne’s promise during the last election to cut the deficit.
