Punishing the incumbent for the cost-of-living crisis

• Department of Political and Social Sciences

This session of the Political Behaviour Colloquium features a presentation by Deniz Tufur, a PhD researcher at EUI

Why did the UK Conservatives lose disproportionate support during the cost-of-living crisis, even among groups that had long been central to the party’s electoral core? This paper argues that standard economic-voting indicators (income, unemployment, macro inflation) miss a crucial micro-foundation: voters react to shocks that compress effective disposable income once pre‑committed expenditures are paid. Housing costs such as mortgage payments and rents, are the largest and least discretionary of these expenditures, and therefore constitute a powerful transmission channel from macroeconomic turbulence to household hardship. Using the British Election Study (BES) internet panel and external time-series evidence on mortgage rates and rental inflation, I estimate respondent-level panel difference-in-differences models tracking the same individuals across waves spanning the onset of mortgage-rate increases and rapid rent growth. The results show that the mortgage-rate shock produced a concentrated electoral backlash among pre-shock Conservative mortgage holders—consistent with a story of coalition (base) erosion rather than generalized anti-incumbent sentiment—while renters exhibit weaker, second-order responses. Heterogeneity by local housing affordability suggests larger effects where flow-cost exposure is plausibly greatest. The findings imply that analyses of economic voting during inflationary episodes should treat effective disposable income (net of compulsory housing costs) as the relevant micro-level quantity linking shocks to political behaviour.

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