Who's pulling the strings now?

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U.K. Elections Are No Longer Just Class Wars

Marc Champion writes editorials on international affairs. He was previously Istanbul bureau chief for the Wall Street Journal. He was also an editor at the Financial Times, the editor-in-chief of the Moscow Times and a correspondent for the Independent in Washington, the Balkans and Moscow. He is based in London.
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The campaign fight between the main Conservative and Labour parties ahead of elections on May 7 is being fought on very familiar ground: Economic competence for the Tories, versus fairness and a strong health service for Labour.

But there's an oddity in the campaign that requires some explanation. Regardless of what each side has said, or how dramatically the economic news has improved, opinion polls have barely moved in recent months. The two main parties remain neck and neck, with little hope that either will be able to rule alone. And one reason is that other single issue parties have changed the U.K.'s electoral landscape, perhaps for good.

The budget debate and election campaign between Labour and the Tories have echoed the U.K.'s long ideological war over the size of the public sector. That war broke out in the late 1970s, when an economic meltdown brought Margaret Thatcher to power and she cut the size of the public sector and its workforce as much as she could. She did so mainly for reasons of economic ideology (on which she was proved right), but also for political reasons: Public sector workers tend to vote Labour more than Tory. So do people who rent subsidized housing from the state. So moving more people into the private sector and making home owners of them (as she did by letting them buy their state-owned apartments) made political sense.

You can trace this ideological battle through the public payroll. Under Thatcher, it fell from 7.4 million people (30 percent of the total workforce) to about 6 million (23 percent), according to a detailed report by the Institute for Fiscal Studies, a respected U.K. think tank. Her Conservative successor, John Major, cut the public payroll further, to below 5.5 million.

Source: Institute for Fiscal Studies

When Labour returned to power under Tony Blair and Gordon Brown, they reversed the trend. By the mid-2000s the number of public sector workers was back above 6 million. And today, after a four-year return to Tory government, it's down to 5.4 million again, comprising 20 percent of the workforce, the lowest share in 50 years. If the Conservatives return to power, it will fall further, to as little as 15 percent of employment, according to the IFS.

Source: Institute for Fiscal Studies

This is what underlies Labour's vein-popping accusations that Prime Minister David Cameron's government is "extreme." And because Britons are fiercely protective of the National Health Service, Labour leader Ed Miliband is warning that a new Conservative-led government would destroy the quality of health care and threaten the jobs of essential state-employed doctors and nurses.

In a half hour debate between Miliband and Cameron yesterday before the release of the budget, every question that Miliband asked Cameron concerned the NHS. And every time Cameron answered, he tried to shift focus onto just-released record (private sector) employment growth. The new budget even included more giveaways to enable people to buy their own homes.

And yet this election, unlike previous ones, may not be decided on this decades old ideological battleground.

The top voter concern is immigration, which the insurgent UK Independence Party has leveraged to achieve a massive increase in support -- from 3 percent in the 2010 election, to 18 percent in a March 13 poll by the Populus agency (the Conservatives were at 29 percent and Labour at 32 percent). Yet neither the Conservatives nor Labour mentioned immigration during yesterday's debate, because they know they can't outflank UKIP on the issue.

UKIP is unlikely to win many seats in parliament, due to the vagaries of the U.K. electoral system. Yet its success in sucking votes away from one or the other of the established parties in each constituency could swing more seats between them on May 8 than anything Labour or the Tories induce by talking about the economy or health service in the weeks ahead.

The other huge shift in this year's election will be toward the Scottish National Party, which could sweep Scotland to gain as many as 40 seats, up from six in 2010. Again, the SNP's narrowly Scottish platform got little mention yesterday (other than a barb from Cameron accusing Miliband of being in the SNP's pocket), because the SNP can only gain from such a debate. And again, the economic argument in London is likely to have little impact on how Scots vote.

I don't think the two big parties are making a mistake by focusing on the economy and public sector as in the past.  That's still probably the best way for them to win over voters before polling day, rather than trying to chase UKIP on immigration, or the SNP on Scottish nationalism. But the disjuncture may help to explain why a torrent of good economic news has yet to have the impact on polling numbers that one would normally expect. This is shaping up to be a truly unique election for the U.K., one that's no longer the exclusive preserve of two political parties and the class war they represent.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Marc Champion at mchampion7@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net