With the General Election fast approaching – on May 7th 2015 – all of the main political parties are clamouring to spin and leak their policies in order to entice voters.
If people were to vote on one aspect of their political agenda – economic policy – which party would win the election on this alone?
The Conservatives have a head start over the other political parties having released some of their plans for the economy in the Autumn Statement last December. But was that all really good news for investors? It was for many potential homeowners, due to the reform of the stamp duty bands or for those looking for jobs. Savers will also benefit as the Individual Savings Account (ISA) threshold is set to increase from £15,000 to £15,240 in April this year.
But if either two main political parties win the next election austerity could possibly continue as a strategy and that would be a “lose, lose” situation for investors and voters.
Deutsche Bank analysts referred to the lack of choice for the UK economy and investors if either of the two main political parties gets into power: “Future austerity will be taking place against a very different policy backdrop from the past five years. In 2010, the impact of austerity on demand was at least partially mitigated by expansionary monetary policy.”
If we look closely at Labour’s proposals for the economy, you will find that there isn’t really a clear strategy. The economy suffered at the hands of the last Labour government culminating in the financial crisis of 2008 and a huge deficit. The last Labour government’s legacy was debt.
Labour party leader Ed Miliband said at a recent Labour party conference that, if elected, he will reduce government borrowing, which will be £91 billion or 5% of GDP this financial year, and raise the minimum wage.
Mr Miliband also said there will be “no return to tax and spend policies” like other past Labour governments. This could be appealing to potential voters, but it is difficult to see how he’d pull it off.
How does this compare to the Liberal Democrats’ economic policy if they gain power again in May – with or without a coalition. The Conservatives have recently warned potential voters of the pitfalls of voting in the Liberal Democrats as, if they do win power, there is a chance they will raise taxes.
However, this differs from the actual pledges by Liberal Democrat Chief Secretary to the Treasury Danny Alexander. If the Liberal Democrats win the next election, Alexander says his party will continue to increase the personal allowance to £10,600 in 2015-16 resulting in a tax cut worth on average £825 for basic rate taxpayers. The Liberal Democrats will also continue to campaign for the ‘Mansion Tax’ on properties worth over £2m – a deeply unpopular policy amongst ‘super rich’ landowners and some baby boomers.
Finally to the UK Independence Party (Ukip). Led by the colourful Nigel Farage, the party has a strong stance on Europe. Mr Farage has said if his party was to get into power it would seek a coalition partnership with the Conservatives – an idea Grant Shapps, the Conservative Party Chairman strongly denies. Speaking on BBC 1’s Andrew Marr show, the Ukip leader said his party would spend an additional £3bn on frontline services, using part of the £10bn it will save from withdrawing from the EU.
All of the main political parties are restricted by the huge UK deficit. All of the main political parties – with the exception of Ukip – seem to offer the general voter something attractive, whether that’s an increase in the personal tax allowance, reduced stamp duty payments or, simply, a job.
If voters went to the polls tomorrow, judging the main political parties on their economic policies alone, the Conservative party would win, followed by the Lib Dems with the Labour party and Ukip coming joint last. Labour gets marked down due to its general vagueness over the economy and its track record; while Ukip’s one-track focus on the EU, and its ability to alienate Europeans living in the UK, means it falls far short of the competition.
With the General Election looming, which party (if any) do you have the most faith in to manage the economy? And what would the knock on effect be for your clients? Let’s hear your views.