×

UK election: Why the world is watching

It's an election that refuses to play by the rules. As the U.K. votes, pollsters are still scrabbling for a reliable forecast – in fact, the calls about "how difficult it is to call" have fast become the cliché of the campaign.

What can be said with certainty is that the traditional two-party dominance that has been a feature of British politics since 1945 has been challenged by a range of insurgent parties. Whatever happens on Thursday, the U.K.'s political landscape has altered for good. Here, we take a look at why and how this is happening.

In the 18 general elections since the British public put Labour's Clement Attlee in power in 1945, U.K. politics has been relatively stable, with the left-wing Labour and the center-right Conservative Party winning 9 each.

Within these governments there were seismic changes: the rise of Thatcherism; the birth of the welfare state under Attlee; near-crippling trade union strikes and the dismantling of the British Empire to name a few. Yet, gradually, both the main parties moved closer to the center ground, and the U.K. became one of the safest havens for investors around the world.

Could that be about to change?

The U.K.'s population has become increasingly disillusioned with the two main parties. Whereas in the 1951 General Election, 95 percent of voters backed either Labour or the Conservatives, this time round polls suggest that around only two-thirds of voters will back the two main parties.

Who's eroding their vote share? The most prominent disruptor is the U.K. Independence Party, whose leader Nigel Farage is a well-known face on U.S. cable news. Yet they're likely to win less than a handful of seats.

Much more important to the formation of the next U.K. government: the Scottish National Party (SNP) – the size of their win in Scotland could determine whether Labour can form a government post-May 8. There's also the Liberal Democrats, currently in government as part of a coalition deal with the Conservatives. And another potential player is Northern Ireland's Democratic Unionist Party (DUP), the least socially liberal of any of the parties sitting in the U.K.'s House of Parliament.

So why are people turning to these parties?

The two candidates to be the next Prime Minister, incumbent David Cameron and Labour leader Ed Miliband, are both white, brown-haired married fathers in their 40s with degrees in Philosophy, Politics and Economics (PPE) from Oxford, who have spent most of their working lives immersed in Westminster politics.

Despite their attacks on each other's policies they are, in fact, pretty similar on a lot of the basics. Both are committed to deficit reduction; both plan to build 200,000 houses a year and both want to spend more money on the state health provider, the National Health Service.

So when someone comes along who appears to be more natural, anti-elitist or just expressing different views, whether it be Boris Johnson of the Conservative Party, Farage, or Nicola Sturgeon of the SNP, they instantly seem like a breath of fresh air.

Ultimately, because of the U.K.'s first-past-the-post system, the struggle for power will come down to less than 100 out of the U.K.'s 650 parliamentary seats. It's these constituencies, that are most vulnerable to a swing away from the incumbent, that have become the focus of relentless campaigning in recent weeks.

All the UK’s problems in one town

One such is Croydon Central, which we will zero in on for much of this piece as this south London suburb reflects many of the attitudes, hopes and prejudices of the rest of the U.K.

The area shot into the international spotlight in 2011, when it was the focus for much of the discontent in the London riots which followed the killing of Mark Duggan by police.

Rocked by the riots
Has Croydon survived the chaos of 2011?

This is an area which is part of London, yet has missed out on the economic boom experienced by much of the capital.

"There's been so much stagnation in Croydon it's very depressing," local businessman Trevor Reeves, whose furniture store House of Reeves became famous when it was burnt down during the riots, told CNBC.



As it is the location for the Home Office's visas and immigration office, it is often one of the first places recent immigrants to the U.K. go. It is also an area where there is increasing discontent at a perceived strain on resources because of the presence of recent migrants, who are often doing work for less money than those who have lived there longer.

Add to that the perceived economic lag between Croydon and other parts of London and you have a febrile mix of discontent.

If you look at house prices, which rank with the weather as a British obsession, they have lagged behind the rest of London's astronomical growth in recent years, and Croydon is the fourth cheapest borough to buy a house in the city. However, average wage growth in Croydon has also been low compared to the rest of London and the area has had lower than average rates of housebuilding – which means that it is still difficult for an ordinary Croydon citizen to own their own property.

"Croydon is very much on the up at the moment. There are huge amounts of investment coming into the town. I think there's a bit of a buzz about the place, but it has been tough for many people in this, in this town in recent years," Tony Newman, the Labour leader of Croydon Council, told CNBC.

This constituency is a key battleground between the Conservative and Labour parties, with challenges to both parties' vote share from the Liberal Democrats, third-placed in the 2010 poll, and rising sympathy for the U.K. Independence Party. A Conservative stronghold in the 1970s and 1980s, it became one of many constituencies to turn to the Labour Party under Tony Blair in 1997, before becoming Conservative again in a narrow victory in 2005. It is bordered by more affluent Croydon South, staunchly Conservative, and Labour bastion Croydon North.

Battling for votes

Gavin Barwell is Croydon's incumbent MP for the Conservative Party – but he is facing a strong challenge from Sarah Jones, the Labour candidate who has worked for the Olympics and for housing charity Shelter. Both major parties' share of the vote seems to be at risk from UKIP, with a poll in March suggesting around 13 percent of those asked were planning to vote for the challenger party. And the Liberal Democrat's share of the vote seems to have collapsed from 13 percent in the 2010 election, to 3 percent.

We spoke to them about several of the key issues determining this election and what their parties would do about them, if elected.


Housing
Is there a housing crisis in the UK?

The U.K. is in the middle of a housing crisis and the country needs more houses - one issue on which all the Croydon candidates are agreed.

They're fully in harmony with their party leadership here. Both major parties have pledged to build over 200,000 new homes a year. They might want to check the viability of this policy with the country's housebuilders, however – two thirds of them think more than 180,000 new homes a year is unachievable under current market conditions, according to Knight Frank. The post-credit crisis slump in housing starts has not been replaced by a cyclical upturn yet, even though house prices have proven remarkably resilient.


The problem is affecting people across the economic spectrum – at its sharpest end, the families forced into temporary accommodation, at its more-likely-to-vote end, middle-class young professionals unable to get on the housing ladder in London.

Yet politicians also fear dipping house prices. From all the different housing proposals both the Conservative and Labour Party have come up with, none seems designed to send prices lower at the middle end of the spectrum.

Immigration
Is the UK full?

The queue of recent migrants from all over the world at the Visas and Immigration centre in Croydon, which processes citizenship requests for the entire U.K., are the human embodiment of what some British people see as a huge problem.

Yet recent emigrants from Eastern Europe have become a focus point for discontent with European Union membership, which has helped UKIP build support among older unskilled workers. In answer to this, Cameron's Conservative Party has tried to introduce new migration controls and promise a referendum on membership of the European Union. The subsequent speculation over whether there will be a 'Brexit' has been one of the biggest worries for U.K. investors in recent months – and even contributed to a potential exit from headquartering in London by HSBC, one of the world's biggest lenders.

There are also concerned that migrants further up the skills spectrum: doctors; nurses; even bankers are finding it more difficult to move to the U.K.

"There's a move in UKIP to blame one section of society for all the ills that we have, and of course we couldn't do without immigrants because they're incredibly important to our economy, to our culture, to our vibrancy, to Croydon so we need immigration. It's a good thing. We just need to make sure it is managed and controlled properly," Sarah Jones, the Labour candidate told CNBC.


Deficit
What will your party do to cut the deficit?

If nothing else, the previous five years have taken the term "deficit" out of economics textbooks, as the government shouted from the rooftops about their plans to cut it. But all of the noise surrounding the deficit in the course of the parties' election campaigns has obscured the fact that all of them want to follow the same policy direction: Cut the difference between what the U.K. government receives and what it spends – and indeed to turn it into a surplus.

Unfortunately they've been not as forthcoming with the details. The Conservatives, Labour, Liberal Democrats and SNP have all had their knuckles rapped by the U.K.'s august Institute for Fiscal Studies for not giving "anything like full details" on their plans to cut the deficit, and keeping voters "somewhere in the dark" over just what they would cut to make their sums add up.

In Croydon, all the candidates are agreed that reducing the deficit is important – but diverge on how it should be done, with both Jones (Labour) and Fearnley (LibDem) arguing that it is very important to make sure the pace of reduction doesn't impact unfairly on the poorest in society. This mirrors their leadership's concerns. Labour's deficit reduction plans, according to the IFS, would leave the UK's debt about £90 billion higher in 2020 than under a Conservative-led government.

UKIP's candidate Peter Staveley outlined the party's very specific plans to reduce the deficit, which involve the party's main bugbear, the EU: "We're currently paying 0.7 percent (of U.K.) GDP in foreign aid, much of that is going to dictators and other bad schemes in foreign countries. We would want to reduce that to 0.2 percent of that. And of course, the other main saving that we would have is from coming out of the EU."


Equality
Is the UK becoming a fairer society?

The trickle-down effect of wealth creation the Margaret Thatcher government of the 1980s hoped for didn't always work as planned – and you can see this in Croydon Central, where local working-class neighborhoods tell a tale of the movement from prosperous working class to poverty-stricken underclass.

If you're an 18-30 year old born poor here, chances are you will have less job security and higher rental costs as a proportion of your income than your parents did, according to a study by the London School of Economics.

While inner London may be booming, it's a different story for the residents of Croydon's New Addington council estate, who complain of difficulty finding jobs, cuts to welfare payments, and high crime rates. As you drive out towards New Addington from central Croydon, the road is bordered with idyllic golf courses and an upmarket hotel.

To these voters, who feel increasingly poor and disenfranchised, Labour's pledge to end zero hour contracts and raise minimum wage may seem attractive – but so too could the Conservatives' promise to extend Thatcher's flagship Right to Buy policy and raise the threshold for paying income tax. And, of course, UKIP's invitation to blame immigration policy.

"Historically this has been the country where if you're born on the wrong side of the tracks, you don't get access to a great education," Barwell told CNBC. "It's far from perfect at the moment but actually inequality has come down under this government, the tax system is a fairer system, the richest 1 percent are paying a bigger share of income tax today than they were in any year under the last Labour government," he added, in defence of the Conservative-led government.


Voice of the people

Hot topics
What the people of Croydon think

Immigration is top of the agenda among the Croydon residents we spoke to. Extensive research by University College London academics Christian Dustmann and Tommaso Frattini, suggests that recent immigrants have been a boon for the U.K.'s coffers and put in around £25 billion more than they have received in the years 2001-11. Yet many U.K. voters believe they are here to game the welfare system and undercut the pay of those who have been here for longer.

Part of the problem is that it is easier for politicians to redirect concerns towards a group who often can't vote in general elections, than hold your hands up and admit to decades of failure to address housing problems and the skills gap among those who were born in the U.K.

With the wind of economic recovery in their sails, the incumbent government should be coasting to victory. Yet their problem is partly that many U.K. voters do not feel better off. And there is also the feeling, expressed by many of those we spoke to, that both government and opposition are part of an elite which doesn't get their concerns.

What many in the Conservative Party are hoping is that the "shy Tory" phenomenon will come through again. This involves the Tories performing better in the election than in polls, in part (some believe) because those canvassed in polls are less likely to admit to voting Tory.

For both main parties, there is also the hope that some of those who tell pollsters they are planning to vote UKIP, will have a change of heart in the polling booth and go with the devil they know.


After the vote, then what?

Bar any last-minute surprise surges for either main party, the most likely outcome seems to be a two- or even three-party coalition or a less formal "confidence and supply" arrangement between either Conservative or Labour and one of the smaller parties.

This could mean another election sooner than the usual five-year term, if a minority government falls out with one of its partners, and increased instability around investment in the U.K.

There will be new elections for the leadership of several parties, depending on what happens on polling day.

If the Conservative Party gets in, expect a referendum on membership of the European Union, sooner rather than later. Current polls suggest that the U.K. public would vote Yes – but the uncertainty could still cause problems in stock markets. There are also genuine concerns that a lack of openness to migrants, whether plumbers or plastic surgeons, could hinder the U.K.'s economy.

Currency strategists seem to be increasingly confident that sterling will bounce against the euro after the election, while stocks in the FTSE 100 and U.K. government bonds could see swings if the British people are seen to have voted in a riskier option.

Whatever happens, the U.K. may not look like the safe bet it has been for decades to investors.

For Croydon, whoever is elected as its next MP will have a lot of work on their hands.

"It's got fantastic potential, Croydon, but no one seems to be able to unleash it. You know Labour, Conservative, Liberal, whatever you are, it just seems impossible, there's no will to get it going," Trevor Reeves told CNBC.


Credits:
Reporting: Catherine Boyle
Video reports: Alice Tidey, Jonathan Cronin
Interactive features: Matt Clinch, Bryn Bache
Design: Bryn Bache & Bruno Ferreira
Code: Bryn Bache
Editor: Phill Tutt

Images: Getty Images


Europe News