Economy and public finances: Key issues for the 2015 Parliament

Following the worst financial crisis in a century and the longest downturn on record, the Bank of England cut its official interest rate (known as the Bank Rate) to 0.5% in March 2009, the lowest level in its 320-year history.

In the UK, a new regulatory framework has been created for banks. In April 2013, the Financial Services Authority was abolished and responsibility was passed to the Prudential Regulation Authority

Historically, productivity in the UK has grown at around 2% per year, but in the seven years since the recession began, it has stagnated. The Office for National Statistics says this is “unprecedented in the post-war period”.

The major parties fought the 2015 General Election with fiscal policies more different than at any other election since 1992. But they have all pledged to return the public finances to balance.

During the last Parliament, the budget deficit captured much political and media attention. But recently another deficit – the current account deficit – has competed for the spotlight.

Each of the parties has its own plans that imply considerably different reductions in day-to-day spending; but they all require at least some cuts that, if followed through.

Local authorities saw substantial reductions in their funding in the last Parliament; and it seems unlikely that budgetary pressures will ease in this one. The degree of change has led to numerous proposals for reform.

The previous Government's reforms to corporation tax were among the most significant of the tax changes that it made in the last Parliament. However, public concerns over avoidance etc pose serious questions about the future of corporation tax.