|Economics of Politics- (03.04.05)|
With a general election just around the corner it would seem to be a good time to discuss what economic factors affect the way people vote. Is it the state of the economy, the level of taxation, median incomes or some sort of feelgood factor?
The reality is that a combination of these factors will affect how a few people vote. With the UK electoral system around 80% of voters never switch parties (or never vote at all). So it is hard to make the case that economic factors determine how these voters make their choice unless you believe there is some major difference in economic orthodoxy between the major parties. Given that there is no real debate about the direction of the UK economy as such, this would be highly illogical.
The media would probably have us believe that some sort of feelgood factor is the most important thing that determines who voters swing to. It is also possible to argue that, like pollsters, this argument gives the media the credibility it craves in that the media itself can shape the level of 'feelgood'.
In the last week the Institute of Fiscal Studies released their calculations that mean and median incomes have ceased to rise over the last year, largely due to the National Insurance increases in the 2002 budget. However at the same time, they also produced evidence that this tax and benefit changes had reduced inequality with the incomes of the poorest 20% increasing faster than previously and faster than the rest of the population. Any feelgood will therefore depend on the degree of personal self interest, which will be better measured by the level of taxation.