LECTURE 7 2010-2015

A New Consensus (2010-2015)

I. The 2010-2015 Coalition Government

  1. Elections System

    • First-Past-the-Post (FPTP)

  2. Political Parties

    • Overview of key political parties during the election.

  3. Key Figures

    • David Cameron (Conservative)

    • Nick Clegg (Liberal Democrats)

II. Austerity

  1. Definition: Austerity is described as a policy choice that involves shrinking the size of the state rather than merely balancing the budget.

  2. Consequences: Increased inequality, resulting in a ‘double-dip’ recession followed by recovery.

  3. Bond Market Implications: How austerity measures influence and are influenced by the bond market.

Elections

  • Types of Elections:

    • General

    • Local

    • Regional

    • European

First-Past-the-Post (FPTP) Electoral System

  • Pros of FPTP:

    • a) Clear choice between parties

    • b) Clear victor usually determined

    • c) Political stability encouraged

    • d) Few coalition governments created

    • e) Encourages positive voting behavior

    • f) Rare tactical voting

    • g) Ensures each MP represents a distinct constituency

    • h) No discrimination against minor parties that consolidate votes in a region

  • Cons of FPTP:

    • a) Ignores size of majorities in individual constituencies

    • b) Votes for losing candidates are irrelevant (wasted votes)

    • c) A victor may not receive more votes than all other candidates combined

    • d) Penalizes smaller parties by disregarding distributed votes

    • e) Leads to a dominant two-party system

    • f) Candidates can be elected with simple majority, not requiring an overall majority (50%)

    • g) Safe seats restrict real choice for voters in many constituencies

Political Parties During the 2010 Election

  • Key Party Leaders:

    • Conservative Party: David Cameron

    • Liberal Democrats: Nick Clegg

    • Additional Parties:

    • Green Party

    • UK Independence Party (UKIP)

    • Scottish National Party (SNP)

    • Plaid Cymru (Wales)

    • Ulster Unionist Party / Democratic Unionist Party (DUP)

    • Social Democratic and Labour Party (SDLP) / Sinn Fein

The 2010 General Election - Overview

  • UK Election Results Summary:

    • Conservative: 307 seats (gain of 100, loss of 3, net +97); Votes: 10,726,614 (36.1% +3.8)

    • Labour: 258 seats (gain of 3, loss of 94, net -91); Votes: 8,609,527 (29.0% -6.2)

    • Liberal Democrat: 57 seats (gain of 8, loss of 13, net -5); Votes: 6,836,824 (23.0% +1.0)

    • Other Parties (summary of seats and votes):

    • Democratic Unionist Party: 8 seats, 168,216 votes (0.6%)

    • Scottish National Party: 6 seats, 491,386 votes (1.7%)

    • Sinn Fein: 5 seats, 171,942 votes (0.6%)

    • Plaid Cymru: 3 seats, 165,394 votes (0.6%)

    • Social Democratic & Labour Party: 3 seats, 110,970 votes (0.4%)

    • Green: 1 seat, 285,616 votes (1.0%)

    • Alliance Party: 1 seat, 42,762 votes (0.1%)

    • UKIP: 0 seats, 919,546 votes (3.1%)

    • British National Party: 0 seats, 564,331 votes (1.9%)

  • Outcome: 307 seats did not achieve an overall majority = Hung Parliament

    • Resulted in Coalition Government

    • David Cameron as Prime Minister

    • Nick Clegg as Deputy Prime Minister

Austerity Policies

Austerity as a Policy Choice

  • Austerity measures were introduced as a means to shrink the state and not merely to balance the budget.

  • Effects of austerity included exacerbated inequality and a series of economic downturns termed ‘double-dip’ depression.

Austerity and the Bond Markets

  • Background: Following the 2007-2008 financial crisis, Labour increased public spending significantly.

    • By 2009, the deficit reached 11% of GDP and the debt level at 53% of GDP.

    • The Conservative Party focused on addressing this debt crisis in the 2010 election.

  • Austerity Measures: June 2010 emergency budget by George Osborne aimed to preserve some Labour plans while instituting immediate cuts to restore market confidence.

  • Growth Impact: The anticipated economic growth from austerity did not materialize, leading to the realization by late 2012 that the deficit would not be eliminated by 2015. Consequently, the UK lost its AAA rating in early 2013.

Tax Cuts as Stimulus

  • Tax Policy: The 2011 budget included plans to reduce corporation tax from 28% to 26% in 2011 and further to 20% by 2015. This shift indicated that austerity primarily focused on cutting expenditures instead of increasing taxes.

Effects of Austerity on Public Services

  • Public services, particularly education and health, were mostly shielded from direct cuts, though limitations on welfare benefits were imposed.

  • Austerity's backdrop was marked by a double-dip recession from 2011 to 2012, which further diminished tax receipts and exacerbated the state of the economy.

  • Hidden Effects: Unemployment, underemployment, and declines in real wages were noticeable outcomes. Some demographics benefited, particularly those with certain mortgages or financial assets, aided by quantitative easing.

  • Political Consequences of Austerity: Despite the adverse outcomes of austerity for many, the political ramifications were not as disastrous as anticipated. This raised questions regarding the adoption of austerity measures despite mixed results.