UK voters count cost of living standards pain

By William Schomberg BEDWORTH, England (Reuters) - Joe Terrence is the kind of voter, fed up with falling living standards, that David Cameron must try to win over if he is to remain Britain's prime minister next month. "I almost voted for Cameron last time around. I felt that there needed to be a change," the 37 year-old parcel delivery worker said as he ate a sandwich, oozing baked beans, at a roadside cafe in this former mining town. But after seeing friends struggle with stagnant wages over the last five years and family members hurt by welfare cuts, Terrence said he would stick with the opposition Labour Party. "David Cameron says we are all in this together, but he doesn't know what life is really like," he said. Cameron's Conservatives scored a shock victory when they took the local parliamentary seat from Labour at the last election in 2010 by the slimmest of margins: a mere 54 votes. They won other seats from Labour in the West Midlands too, making the industrial region around Birmingham, Britain's second-biggest city, a battleground for the election on May 7. The vote is about more than just who runs the country over the next five years. It could pave the way for a British withdrawal from the European Union or give Scottish nationalists, who want independence, sway over parliament. On paper, the Conservatives should reap dividends from a sharp recovery in Britain's economy which outpaced the world's other big, rich nations last year. Employment has surged, including in the West Midlands where logistics firms have set up operations, providing new jobs to a workforce that once relied on the mines. But after years of wages rising less than inflation almost without interruption - something the Bank of England's chief economist has described as unprecedented since at least since the mid-1800s - Labour is trying to focus voters on its image of Britain in the grip of a 'cost-of-living crisis'. Household income grew by less than 2 percent in total over the last three years, much weaker than growth of 9 and 5 percent after British recessions in the 1980s and 1990s, according the Institute for Fiscal Studies, an independent think tank. Even more unusually, household spending on basic goods remains below its levels before the financial crisis, suggesting Britons fear their incomes took a permanent hit, the IFS said. It is not just in Britain that workers have had a hard time. U.S. Democratic presidential hopeful Hillary Clinton launched her campaign for the White House this week with a promise to help Americans recovering from tough economic times. But in contrast to France and Germany, where incomes are now comfortably above where they were five years ago, in Britain they are only expected to go above that level this year, according to the country’s independent budget forecasters. PUNISHMENT OR PATIENCE? It remains to be seen whether voters will punish the Conservatives and their Liberal Democrat coalition partners for the pain of the last few years. A recent pick-up in earnings and a plunge in inflation have given the Conservatives hope that voters will feel things are heading in the right direction, blunting Labour's attacks. "People are likely to feel the recent changes more than what happened over the previous three or four years," said John Van Reenen, a professor at the Centre for Economic Performance, part of the London School of Economics. "But the improvement has to be consistent over a period of time, and for many people that has not happened yet." Gauges of consumer confidence suggest voters are noticing how the global oil price fall has put more cash in their pockets. But the big picture remains one of a country that feels hard up, Nick Moon, a director of polling firm GfK, said. In the 1980s, when Margaret Thatcher was a Conservative prime minister, the unemployed suffered sharp income losses but most people became better off, he said. "This time, everyone has felt the hurt," Moon said. "For confidence to be just the positive side of neutral is pretty anaemic, despite all the headlines about recovery." Cameron hopes that the Conservative Party's lead in opinion polls in terms of economic competence, despite the slow living standards recovery, will prove decisive on election day. The state of the economy plays a bigger role in influencing voters in Britain than in some other countries in Europe where there are bigger ideological differences between political parties, according to some academics. Raymond Duch, an Oxford University professor who studies the role of the economy in politics, saw some parallels between the May vote and the 1992 U.S. presidential election when Bill Clinton defied the odds to unseat George H. W. Bush. There were signs a recovery from recession was in train but Bush failed to match the message of hope of his challenger. "The fundamentals were good but (Bush) failed to convince the electorate and Clinton spun it to his advantage," Duch said. Similarly, economic recovery was well underway before Labour's Tony Blair won power with a landslide in 1997 but by then the electorate had decided it was time for a change from Conservative government. Trying to send a more hopeful message to voters than the Conservatives' central plan for more spending cuts, Cameron this week declared Britain was "on the brink of something special". SIGNS OF RECOVERY It's not just Labour he has to worry about. The anti-European Union UK Independence Party's calls for a clampdown on immigration have found receptive ears among many lower-earning voters, some of whom blame migrants for suppressing wages. In Bedworth, builder Paul Davies said he would give up voting Conservative in May and back UKIP instead after seeing only a meagre recovery in work over the past 12 months. "In 2008 I had seven people in my team and now there is only one," he said. Still, not everyone has the same glum view of the economy. Sean Mackey said turnover rose 20 percent over the past year at the two companies he co-owns which make tools for window manufacturers, helped by Britain's housing market recovery. Workers on a noisy shop floor beneath his office received an average pay increase of 12 percent in the period, he said. Mackey said he would vote Conservative again. "From a working-class man, voting Tory sounds crazy," he said, using a colloquial term for the Conservatives. "But I think they have the right approach to stabilising the economy. "If you’re going to potentially lose your home then you've got to stop going to the pub, get a smaller car or walk to work. You may not like it but it’s something you’ve got to do, and it’s the same with the economy." (Writing by William Schomberg; Editing by Peter Graff)