UK

Politics:

• Analysis

  UK politics: Baracking the voters

  How to win elections: Baracking the voters

  British parties want to emulate the American master

  AT TEN o'clock, recalls a Labour Party staffer, the sweep began. From neighbourhoods across America, information rippled up a telephone chain. By 10.25am on election day, Barack Obama's campaign headquarters in Chicago knew exactly where its troops were and how many ballots had been cast in each precinct. Activists were promptly redeployed. The same thing happened at 2pm and again at 4pm. The visitor was left wide-eyed, and inspired: "It can work in Britain, too."

  Astonishing as it may seem, the 2015 British general-election campaign has begun. The Conservative Party's campaign headquarters sports a countdown clock informing staffers how many seconds remain before polls open. Like Labour and the Liberal Democrats, it has a list of target seats. And all three parties are keen to learn from the great American vote-wrangler.

  The campaign model they so admire rests on three foundations: a large and disciplined field operation, a good system for managing data and plenty of cash. British political parties used to boast formidable field machines, but they have slipped. Even Labour, which boasts most boots on the ground, has a membership of under 200,000. The Conservatives and the Liberal Democrats are finding that coalition government is glyphosate to the grassroots.

  With traditional parties shrinking, Britain's politicos talk of the Obama model as a solution. The art of community organising--convening energetic groups of activists around local issues--is all the rage. Honed by Mr Obama in the Industrial Areas Foundation (IAF) in 1980s Chicago, it inspired his decentralised campaign machine. Labour has flown in Arnie Graf, a former IAF director, to overhaul its structures. The Conservatives have established a residential training academy for campaign managers. The Liberal Democrats want to defend seats they hold by running almost purely local campaigns.

  This is easier said than done. Britain's politicians tend to keep activists on a tight leash--and have little cash with which to recruit and train professional organisers. Matthew McGregor, a Briton who was part of Mr Obama's digital communications team, says building the Organising for America network took a "will to invest" that is mostly absent from Westminster politics. Time to select candidates and build local movements is running out, adds Paul Goodman, a Tory commentator. "Having cups of tea with people is very important," he explains.

  If the campaigners are the limbs of the Obama model, a good data system is the brain. It enables campaign supremos to target tailored messages at precisely the right voters. Of the British parties, the Liberal Democrats are farthest ahead technologically. In 2011 they bought the snazzy Voter Activation Network used by the Obama campaign, which enables users to generate finely customised lists of voter contact details. Sadly, the party has little raw information--and too few canvassers with which to obtain it. The other parties are hurriedly upgrading their systems.

  The Conservatives enjoy the healthiest balance-sheet, although it is footling by American presidential standards. According to the Electoral Commission, the party has out-fundraised Labour in three of the past four quarters. Its debts are much smaller and its finances less reliant on unpredictable trade union bosses. This makes it easier to invest in staff and technology: the Tories have already recruited three waves of campaign managers for 2015.

  Along with the other parties, the Tories are concerned at their over-reliance on the (admittedly deep) well of donations from wealthy folk and institutions. Politicians are therefore looking covetously at Mr Obama's extensive network. In the 2012 campaign, the president drew on a much broader pool of 4m small donors. Mr McGregor insists that, with time, an equivalent British donor base of up to 1m is eminently achievable; others scoff at that.

  As they rush to emulate American methods, British party operatives acknowledge a fundamental difference. In America, the personality of the top candidate infuses the campaign. It is used to energise supporters, court donations and unite a sprawling operation. In Britain the same tech-savvy, decentralised structures are being used quite differently: to win over an electorate that loathes national politicians. The Liberal Democrats plan to fight "75 by-elections" precisely because their role in the coalition--personified by Nick Clegg--is so unpopular. Even David Cameron, the most appealing of the three main party leaders, has been conspicuously absent from recent Tory election literature. Whereas presidential candidates must insert national politics into voters' lives, Westminster's unloved politicians benefit from keeping the two separate.

  December 22, 2012

• Background

  UK: Key figures

  David Cameron

  The youngest prime minister in modern times, David Cameron has enjoyed a largely successful first year in office, despite grumblings from the right of his party that core Conservative Party principles are being sacrificed to the constraints of coalition politics. His assured style of leadership contrasts sharply with his Labour Party predecessor, Gordon Brown, and his approval ratings exceed those of the government and his main political opponents. However, relations with the junior coalition partner, the Liberal Democrats, are now more fraught. Mr Cameron could struggle to strike a balance in keeping an enfeebled Lib Dem party onside so as to hold the coalition together, while continuing to face down strident backbench demands from within his own party not to compromise with the junior governing partner.

  George Osborne

  Still in his thirties, the chancellor of the exchequer is an adept political strategist and Mr Cameron's closest political ally. His medium-term programme to put the public finances on a stable footing assuaged investors' earlier concerns over UK fiscal sustainability, but he will face a battle to keep the deficit-reduction plan on track in the face of much weaker than expected economic growth—a consequence of the deep structural deficiencies in the UK economy.

  Nick Clegg

  Deputy prime minister and Lib Dem leader, Mr Clegg was instrumental in persuading his party to enter a coalition with the Conservatives. The Lib Dems have so far borne the brunt of public discontent, with support for the party haemorrhaging while that for the Conservatives has held up. With the Lib Dem-backed referendum on electoral reform having been soundly defeated in May 2011, he will have to fight to convince his party that it is in their interests to remain in the coalition. His leadership could be challenged if restive Lib Dems become increasingly fearful of electoral annihilation.

  Ed Miliband

  Leader of the main opposition Labour Party, Mr Miliband beat his brother and the former minister of foreign affairs—David Miliband—in a leadership contest after the party's general election loss in 2010. A less convincing public speaker than his brother and with close links to the trade union movement, under his leadership the party has struggled to capitalise on the unpopularity of the coalition's reforms. He has time on his side, but will need to offer a more convincing message to voters and to his party.

  June 15, 2011

• Structure

  UK: Political structure

  Official name

  United Kingdom of Great Britain and Northern Ireland

  Form of state

  Parliamentary monarchy

  Legal system

  Based on statute and common law; no written constitution; Scotland has its own legal system

  National legislature

  Bicameral; the House of Commons has 650 members directly elected on a first-past-the-post basis; the upper chamber, the House of Lords (about 750 members), was reformed in 1999, when most hereditary peers lost their seats; 90 retain them pending further reform

  Electoral system

  Universal direct suffrage from the age of 18

  National elections

  Next general election due on May 7th 2015

  Head of state

  Queen Elizabeth II, who acceded to the throne in 1952

  National government

  Cabinet headed by the prime minister; the prime minister is appointed by the monarch on the basis of ability to form a government with the support of the House of Commons; the UK is governed by a coalition of the centre-right Conservative Party and the centrist Liberal Democrats, which took office in May 2010 after 13 years of uninterrupted rule by the centre-left Labour Party

  Main political parties

  Conservative Party; Labour Party; Liberal Democrats; UK Independence Party; Scottish National Party; Plaid Cymru (Welsh National Party); Northern Ireland parties: Ulster Unionist Party, Democratic Unionist Party, Social Democratic and Labour Party, Sinn Fein

  Prime minister: David Cameron (Con)

  Deputy prime minister: Nick Clegg (Lib Dem)

  Chancellor of the Exchequer: George Osborne (Con)

  Chief secretary to the Treasury: Danny Alexander (Lib Dem)

  Leader of the House of Lords: Lord Strathclyde (Con)

  Leader of the House of Commons & Lord Privy Seal: Andrew Lansley (Con)

  Parliamentary secretary to the Treasury & Chief Whip: Sir George Young (Con)

  Paymaster General & Minister for the Cabinet Office: Francis Maude (Con)

  Secretaries of state

  Business, innovation & skills: Vince Cable (Lib Dem)

  Communities & local government: Eric Pickles (Con)

  Culture, Olympics, media & sport: Maria Miller (Con)

  Defence: Philip Hammond (Con)

  Education: Michael Gove (Con)

  Energy & climate change: Ed Davey (Lib Dem)

  Environment, food & rural affairs: Owen Paterson (Con)

  Foreign & Commonwealth affairs: William Hague (Con)

  Health: Jeremy Hunt (Con)

  Home office & women & equalities: Theresa May (Con)

  International development: Justine Greening (Con)

  Justice & Lord Chancellor: Chris Grayling (Con)

  Northern Ireland: Theresa Villiers (Con)

  Scotland: Michael Moore (Lib Dem)

  Transport: Patrick McLoughlin (Con)

  Wales: David Jones (Con)

  Work & pensions: Iain Duncan Smith (Con)

  Central bank governor

  Mervyn King

  December 01, 2012

• Outlook

  UK: Key developments

  Outlook for 2013-17

  • The Conservative-Liberal Democrat governing coalition has a solid majority in parliament. Strained relations will be tested by ongoing fiscal austerity and economic weakness, but an early election would be a gamble for either party.
  • Political stability will also be challenged by the euro zone crisis. Moves towards closer euro zone governance will increasingly test UK-EU relations. The Labour Party should be well placed to win the 2015 election, but its poll lead is fragile.
  • Continuing efforts to shrink the UK's largest-ever peacetime budget deficit will dominate policy debate. An ambitious seven-year austerity programme entails tax rises and the longest period of real-term spending cuts since the 1940s.
  • High private-sector indebtedness, resilient unemployment and a dysfunctional banking sector will result in a slower pace of deficit reduction than in official forecasts. The coalition will face persistent pressure to do more to boost growth.
  • The Bank of England (BoE, the central bank) will persist with highly accommodative monetary policy, despite above-target inflation. Attention is likely to turn from quantitative easing to other unconventional steps. No rate rise is in prospect.
  • After a 6.3% slump in output over five quarters in 2008-09, real GDP recovered sluggishly in 2010-11. The economy registered a small contraction in 2012, but we forecast annual growth of 1% for 2013-17. There are large downside risks.

  Review

  • The government suffered a non-binding parliamentary defeat over its strategy to demand a real-term freeze in the 2014-20 EU budget. The motion passed by Conservative rebels and Labour called instead for an unprecedented cut.
  • The rebellion by 53 Conservative MPs marked another blow to the authority of the prime minister, David Cameron. It also heightened the UK's already tense relations with the EU, implying an increasingly strident Eurosceptic position.
  • The US carmaker, Ford, announced plans to end vehicle production in the UK in mid-2013, with the closure of two plants and the loss of around 1,000 jobs.
  • Preliminary data showed real GDP rebounding by 1% quarter on quarter in July-September, officially ending the double-dip recession. Output was boosted significantly by one-off factors that will unwind during the fourth quarter.
  • Amid recent signs of waning enthusiasm for QE in the BoE, the central bank did not expand its asset-purchase programme at its November policy meeting.
  • The Treasury announced that the cash surplus generated by QE will be treated as government revenue, flattering the near-term position of the public finances.
  • Survey data weakened in October. Services activity grew at its slowest pace in almost two years, while falling new orders deepened the manufacturing slump.

  December 01, 2012

Economy:

• Background

  UK: Country fact sheet

  Fact sheet

  Annual data	2011	Historical averages (%)	2007-11
  Population (m)	62.7	Population growth	0.7
  GDP (US$ bn; market exchange rate)	2,434.4	Real GDP growth	0.2
  GDP (US$ bn; purchasing power parity)	2,240.6	Real domestic demand growth	-0.3
  GDP per head (US$; market exchange rate)	38,815	Inflation	3.2
  GDP per head (US$; purchasing power parity)	35,725	Current-account balance (% of GDP)	-2.2
  Exchange rate (av) £:US$	0.62	FDI inflows (% of GDP)	3.7

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  Background: The end of the second world war coincided with the decline of the UK as an imperial power. Residual links with former colonial territories, close relations with the US and a separate sense of identity delayed UK membership of the European Community (now EU) until 1973. EU membership has proved fraught, with successive governments resisting the bloc's integrationist drift. A gradual shift towards closer economic governance in the euro zone implies an inevitable diminution of British influence over future European policy, with potentially profound implications for UK-EU relations.

  Political structure: The UK is a constitutional monarchy. The head of state is Queen Elizabeth II. Parliament has an elected House of Commons (650 seats) and a non-elected House of Lords (non-fixed membership of around 750). After 13 years of uninterrupted rule by the centre-left Labour Party, the general election in May 2010 produced a rare hung parliament and led to the formation of the UK's first formal coalition government since 1945, comprising the centre-right Conservative Party and, as the junior partner, the centrist Liberal Democrats.

  Policy issues: Economic policy will remain in uncharted waters, with significant levels of financial-sector support, record-low interest rates, unprecedented central bank intervention and an unsustainable fiscal deficit. Monetary policy focus may shift from quantitative easing to other unconventional measures. Given the UK's high indebtedness and impaired supply capacity, the coalition will continue to struggle to reconcile its aims of deficit reduction and economic recovery. Its seven-year programme of fiscal tightening comprises tax rises and the longest period of real-term public spending cuts since the 1940s. After decades of underinvestment in industrial infrastructure and related skills, and with public capital spending slashed, credit availability constrained and many of the UK's largest trading partner economies subdued, achieving any significant economic rebalancing or sustainable growth is likely to stretch beyond the forecast period.

  Taxation: The tax rate on profits of large companies is being steadily lowered, from 28% in 2010 to 22% by 2014 (24% as of late 2012). There are three bands of personal income tax, set at 20%, 40% and 50% (the latter was introduced in April 2010 and will fall to 45% from April 2013). The standard rate of value-added tax (VAT), from which a variety of everyday goods are exempt, rose from 17.5% to 20% in January 2011. Excise duties on tobacco and alcohol are among the highest in Europe.

  Foreign trade: Exports of goods totalled £299.1bn (US$479bn) in 2011, while imports amounted to £399.1bn, resulting in a trade deficit of £100bn. The traditional services surplus widened to £76.3bn. A rising surplus on the income balance was narrowly offset by the transfers deficit, producing an overall current-account deficit of £29bn (equivalent to 1.9% of GDP).

  Major goods exports, 2011	% of total	Major goods imports, 2011	% of total
  Mechanical machinery	12.8	Electrical machinery	12.9
  Electrical machinery	8.8	Mechanical machinery	8.2
  Pharmaceutical products	7.6	Crude oil	6.9
  Leading export markets, 2011	% of total	Leading import suppliers, 2011	% of total
  Germany	13.3	Germany	12.7
  US	10.9	China	7.9
  Netherlands	7.9	US	7.2
  France	7.4	Netherlands	7.1

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  December 01, 2012

• Structure

  UK: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 01, 2012

• Outlook

  United Kingdom: Country outlook

  United Kingdom: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The general election in May 2010 resulted in a hung parliament, with no party gaining a majority in the 650-seat legislature. Electoral arithmetic dictated that the most viable option for a stable, majority government was a formal coalition (the UK's first since 1945) of the right-of-centre Conservative Party and the centre-left Liberal Democrats (Lib Dems). Implementing an initially quite radical policy programme has required compromise on the economy, energy, defence, higher education, healthcare and financial services reform. All these issues remain sources of political conflict, with a contentious fiscal austerity programme the most prominent. After a mostly amicable first year in office, coalition tensions have risen steadily as economic prospects have darkened and as the euro zone crisis has deepened.

  ELECTION WATCH: Increasing tension between the coalition partners and potential fallout from the austerity programme and euro zone crisis have shortened the odds of an early election. It would be a major gamble for either party to trigger an early poll, but one cannot be ruled out should economic activity continue to disappoint (this could conceivably coincide with a leadership challenge to Mr Cameron). The Conservatives are the more likely to consider an early election, but their current poll standing (some 8-10 percentage points behind the opposition Labour Party) suggests it remains an improbable scenario in the near term. The Economist Intelligence Unit's baseline forecast is that the coalition holds together until close to the end of its term in May 2015. Before then, European Parliament elections in June 2014 are likely to raise the profile of the UK Independence Party, which wants the UK to leave the EU. Its relative success will have an influence on all the main parties--particularly the Conservatives--in the run-up to the general election. Given the economic backdrop and broad dissatisfaction with the coalition parties, Labour should be well placed to win the election. But although its support has risen since 2010, its poll lead appears fragile in the face of voter disillusionment with all the mainstream parties. We expect Labour to continue to struggle to convince voters that it offers a credible alternative. The outcome of the next election remains highly uncertain, with no party expected to win an outright majority.

  INTERNATIONAL RELATIONS: The coalition is an uneasy alliance between the pro-European Lib Dems and a Conservative Party in which Euroscepticism is dominant (reflecting broad public opinion). Tensions have risen as the euro zone crisis has deepened, as have calls for a formal renegotiation of the terms of the UK's EU membership, followed potentially by a national referendum. Moves towards closer euro zone economic governance inevitably imply a widening two-tier Europe and diminution of British influence over future EU policy. A straight "in-out" referendum on UK membership of the EU is looking increasingly likely in the next parliamentary term. All the main party leaders want the UK to remain within the Union, but Eurosceptic attitudes in Britain are deeply entrenched and will be hard to reverse. An exit is certainly possible after 2015. A referendum on Scottish independence is planned in late 2014, at which we expect voters to reject full independence but support enhanced devolution. The government will continue with efforts to deepen the UK's (still modest) commercial ties with emerging powers in Asia and Latin America.

  POLICY TRENDS: Almost five years after the global financial crisis hit, economic policy remains in uncharted waters, with record-low interest rates, unprecedented central bank intervention, a substantial fiscal deficit and widespread financial sector support. Uncertainty will persist over the entire forecast period, as economic weakness at home and abroad weighs on household, sovereign and bank balance sheets. Given the UK's private-sector debt overhang, dysfunctional banks, a propped-up and overvalued housing market and impaired supply capacity, the government will continue to struggle to reconcile its aims of deficit reduction and economic recovery, as self-imposed fiscal constraints limit policy options in many areas.

  ECONOMIC GROWTH: The UK economy experienced an overall peak-to-trough decline in output of 6.3% over five consecutive quarters in 2008-09, recording the largest annual fall in 2009 since the second world war. The economy's underlying structures remain fragile, highlighted by weak growth of 0.9% in 2011 and a return to recession in early 2012. Following the collapse of a huge debt-financed asset bubble and the end of a long period of easy money and cheap imports, the UK faces a rare and protracted process of balance-sheet adjustment, at the same time as important financial and trade links with Europe are depressed by the euro zone crisis.

  INFLATION: Annual CPI inflation eased back steadily from its September 2011 peak of 5.2% to 2.2% in September 2012, mainly owing to indirect tax and commodity price base effects. But inflation rebounded to 2.7% in October, in response to higher utility tariffs, a rise in university tuition fees and as the impact of poor global harvests pushed up food prices. The upward trend in inflation is forecast to continue into 2013 owing to resilient energy and food price pressures. Domestic economic weakness will persist, but the damage to UK productive capacity from the long crisis, the lagged effects of global monetary stimulus and persistent upward commodity price pressure from the ongoing fundamental shift in global demand trends will result in CPI inflation remaining above the central bank's 2% target for most, if not all, of the forecast period. Annual inflation is estimated at 2.9% in 2012, rising to 3.2% in 2013. It is forecast to average 2.6% in 2014-17.

  EXCHANGE RATES: After a long period of overvaluation, sterling's real trade-weighted value declined by 30% between mid-2007 and early 2009, falling below its long-term average. The currency has since recovered some ground and in trade-weighted terms it is now about 20% below its pre-crisis level, which we believe is reasonably close to its "fair value". Given an absence of pronounced support for any major global currency, market movements will continue to be driven by investors' volatile risk appetite and central bank policies. Economic weakness and market expectations of additional intervention by the BoE will weigh on sterling to some extent, but the impact will be mitigated by continued central bank balance-sheet expansion in the US and euro zone. Our central forecast is for sterling to remain fairly stable against the dollar in 2013, before strengthening moderately in 2014. We expect a gradual appreciation against the euro. But sterling will remain prone to volatility, with the risk that renewed financial turmoil could trigger a sharp currency sell-off.

  EXTERNAL SECTOR: After widening to 3.3% of GDP in 2010, the current-account deficit narrowed to 1.9% in 2011, as larger surpluses on the services and income accounts offset a higher merchandise trade imbalance. The deficit is expected to rise in 2012-14, before narrowing slightly. The UK will remain a substantial net energy importer.

  December 01, 2012

• Forecast

  UK: Country forecast summary

  Country forecast overview: Highlights

  • Five years after the global financial crisis hit, economic policy remains in uncharted waters, with record-low interest rates, central bank money printing, an unsustainable fiscal deficit and financial-sector support. Economic weakness and financial stress will persist for most, as will the risk of euro zone dislocation.
  • The governing coalition of the centre-right Conservative Party and centrist Liberal Democrats has a solid majority in parliament, but tensions have risen as the economic environment has worsened. Government stability will be tested by painful fiscal austerity and prolonged economic weakness. The protracted euro zone crisis poses a major risk to any hope of a sustained economic recovery in the forecast period, while also having profound implications for UK-EU relations. The coalition has little choice but to accept closer euro zone economic governance, even though this implies a diminution of British influence over future EU policy.
  • Given the grim economic outlook and rising public dissatisfaction with both coalition parties, it will be a gamble for either to trigger an early election. But one cannot be ruled out given the government's difficulty in implementing austerity measures amid continuing tension over Europe. The main opposition Labour Party should be well placed to win the 2015 general election, but its poll lead is fragile.
  • Continuing efforts to shrink the UK's largest-ever peacetime budget deficit will dominate policy debate. An ambitious fiscal tightening programme comprises tax rises and the longest period of real-term public-spending restraint since the 1940s. High private-sector indebtedness, sticky unemployment and dysfunctional banks will result in a slower pace of deficit reduction than in official forecasts.
  • The highly accommodative monetary policy of the Bank of England (BoE, the central bank) will continue until clear signs emerge of a sustainable recovery or of serious inflation risk. At present, there is little prospect of either. Attention is likely to shift from the current quantitative easing programme of gilt purchases to other non-standard measures, although "liquidity-trap" conditions imply that real economy gains may remain modest. No interest-rate rise is likely before 2017.
  • After the collapse of a huge debt-financed asset bubble and the end of a long period of easy money and cheap imports, the UK faces a protracted process of balance-sheet adjustment, at the same time as key financial and trade links with Europe are depressed by the euro zone crisis. Output will be constrained by fiscal retrenchment, private-sector deleveraging, restricted credit flows and weak demand across developed economies. After a modest decline in 2012, real GDP is forecast to rise by 0.5% in 2013 and to average 1.1% annual growth in 2014-17.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP (% change)	-0.2	0.5	1.3	1.7	0.9	0.4
  Consumer price inflation (av, %; CPI)	2.9	3.2	2.9	2.7	2.2	2.6
  Budget balance (% of GDP)	-7.9	-7.5	-6.5	-6.0	-5.5	-5.1
  Current-account balance (% of GDP)	-3.4	-3.5	-3.8	-3.3	-3.0	-2.6
  3-month Treasury rate (av; %)	0.8	0.3	0.9	1.0	1.2	1.2
  Exchange rate US$:£ (av)	1.58	1.59	1.61	1.63	1.61	1.59
  Exchange rate €:£ (av)	1.23	1.26	1.29	1.32	1.28	1.26
  Exchange rate US$:€ (av)	1.28	1.26	1.25	1.24	1.26	1.26

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  December 01, 2012

View detailed map

Country Briefing

Land area

244,100 sq km (including inland water), of which 71% is arable and pasture land, 10% forest and 19% urban and other. England totals 130,400 sq km, Scotland 78,800 sq km, Wales 20,800 sq km and Northern Ireland 14,100 sq km

Population

62.262m (official mid-year estimate, 2010)

Main towns

Population in '000 (official mid-year estimates, 2010)

Greater London (capital): 7,825

Birmingham: 1,037

Leeds: 799

Glasgow: 593

Sheffield: 556

Climate

Temperate

Weather in London (altitude 5 metres)

Hottest month, July, 13-22°C; coldest month, January, 2-6°C; driest months, March, April, 37 mm average rainfall; wettest month, November, 64 mm average rainfall

Language

English. Welsh is also spoken in Wales, and Gaelic in parts of Scotland

Measures

Officially metric system, but the former UK imperial system is still widely used

Currency

Pound (or pound sterling) = 100 pence

Average exchange rates in 2011: US$1.60:£1; €1.15:£1

Time

GMT (summer time, 1 hour ahead)

Fiscal year

April 1st to March 31st; tax year April 6th to April 5th

Public holidays

January 1st, Good Friday, Easter Monday, first Monday in May, last Monday in May (switched to first Monday in June 2012, due to Queen's Diamond Jubilee celebrations, with additional public holiday on June 5th 2012), last Monday in August, December 25th and 26th

March 01, 2012