The OU's lecturer in economics, Alan Shipman, explores the impact of a hung parliament on the UK economy

The eurozone crisis, centred on Greece, gives the UK a short interval in which to clarify its economic and political direction, before financial markets start to worry about its own debt. But a hung parliament leaves it unclear how the UK will start to reduce its record budget deficit, and stabilise debt at affordable levels. Once Germany underpins Greece, attention will be turned to UK public finances – and will become critical if there is no clear prospect of a government able to force unpopular spending cuts and tax increases through Parliament.

Bank of England [Image: Matt_From_London under Attribution Generic 2.0 license]

When Germany encountered a similar problem in 2005, the two big parties formed a ‘grand coalition’ which then passed difficult adjustment measures. One problem for the UK is that many foreign investors don’t understand why the Conservatives and Labour can’t do the same. If either of the big parties tries to form a minority government, there will be doubts about its ability to tighten the budget, and the UK’s top credit rating could be at risk. The danger will grow if there is prolonged, inconclusive discussion on coalition formation, or if the next government gets absorbed in constitutional issues such as changes to the voting system.

The UK’s export-led recovery is at risk from a sinking euro, and it could be hit by a general sell-off of European bonds and currencies if the crisis spreads from Greece to other eurozone members. But a speedy resolution of the eurozone crisis would also be bad for the UK, since it would highlight the assistance that deficit nations can receive from the zone, which non-members don’t enjoy. One reason the Conservatives did not get the swing they hoped for, into a clear majority, is that the eurozone’s problems blunted their message on the economy. It became harder to claim that the UK had suffered a worse economic downturn than other European economies – because Germany has already suffered a deeper recession, and it’s now clear that there may be worse to come for several other members of the zone. 

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This blog is coming to you as part of Open2.net’s 92Rewind Twitter stream in the lead up to this year’s General Election.

On polling day in 1992…

The Tories won a surprise election victory.

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Looking back on our 92Rewind tweets and the past few weeks of electioneering, where are the similarities?

As we've tweeted news from the 1992 election and kept an eye on news from this year's election, we couldn't help but notice the similarities which begs the question: will the outcome be the same?

Let's first check out the similarities. To many commentators, the Leaders’ Debates have shaped this year’s election. Though leaders might not have taken part in a televised debate back in 1992, it was an issue that dominated the opening days of the 1992 election with John Major ruling out a TV debate and Kinnock expressing outrage at his decision.

[Image: kagey b under CC-BY-NC-ND licence] 

Issues have been the same too. Back in 1992, NOP’s first election poll for The Independent showed the top worries were the state of economy, Tory plans for the NHS and Labour tax plans. This year, the NHS hasn’t been mentioned as much but there’s no doubt the state of the economy has been a major factor, as have tax plans.

As for gaffes, back in 1992, the War of Jennifer’s Ear erupted as a Labour NHS election broadcast was denounced as a ‘fraud’ by The Daily Express. And, of course, this year we’ve had Bigotgate. There’s been a few controversial de-selections too: back in 1992, it was Tory MP John Browne who was de-selected as a candidate for failing to declare business interests. This year, it was Philip Lardner who was dropped as Conservative candidate for North Ayrshire & Arran for writing that “Homosexuality is not ‘normal behaviour’” on his election website.

Egg-throwing

And every year, there’s always the odd egg or two thrown! Cameron nearly got splatted with one this year, and back in 1992, John Major was confronted by a hostile egg-throwing crowd while he was on his soapbox. Even that old grandee Maggie Thatcher was attacked with a bunch of daffodils in Stockport back in 1992.

It was interesting to note that a couple of weeks into the ’92 election, figures from the Broadcasters Audience Research Board revealed election media fatigue was already setting in. But this year, election fever has ramped up and up… no doubt buoyed by the Leaders’ Debates. As for tactics, the soapbox played a part in both elections, with John Major jumping on it eighteen years ago, and Cameron doing the same this year.

‘Hung parliament’ were also two words on the lips of voters both back in ’92 and now, with polls showing parties neck to neck and leaders in both decades hinting at coalitions (“I agree with Nick,” said Brown), things are no different. Except this year, with Cleggmania hitting the streets, the Lib Dem steer in creating a hung parliament has never been stronger. 

The waiting game

With tweeters and Facebookers turning against the printed media this year, some commentators have suggested newspapers' election power is waning. But that doesn't take away from the fact that the media always has a field day during elections and The Sun often leads the way with its inventive headlines, this year being no different: see The Guardian for a round-up of this year’s polling day headlines.

But there's one thing they can't predict, both now and back in '92, no matter how hard they try: who will win? Will there be a poll-defying result with the current Government staying in power, as it did back in 1992? Or will the Tories do what the polls suggest and win a victory after three straight defeats at the ballot box? Or will the people really agree with Nick, leading to no clear victory, delivering the nation a hung parliament?

Soon we will know…