Britain at the crossroads – but which path will it take in 2014?

From the challenges that will be faced by the main party leaders and economic policymakers to the celebrations for Shakespeare's birthday, Guardian writers take a look at what 2014 will bring

Politics: three issues that will shape the nation's future

It is not too far-fetched to say that 2014 will be the year the UK decides not its next government, but its political identity.

The vote in the European parliament elections in May, the likely verdict of the Chilcot inquiry in the summer on the value of Britain's special relationship with America, and the referendum on Scottish independence in September will be three indispensable waymarks that will help chart the shape of modern Britain.

It is possible that 2014 will be a year of convulsions. Ukip coming first in the European elections, revealing an unstoppable tide of anger demanding an in-out referendum on Europe. The Chilcot inquiry and the British parliament concluding that the conduct of the Iraq war has revealed something rotten in the special relationship with America, and British foreign policy requires a re-evaluation to match that after Suez in 1956.

Finally, the Scots defying the current polls and following the Scottish National party leader, Alex Salmond, towards separation, sending an electric shock through the English, Westminster politics and business. In such circumstances the 2015 general election will feel like an afterthought as numbed English politicians, stripped of authority, stumble to explain the revolution of 2014.

At present it looks more likely that Britain will muddle through 2014, even if it is the year of living dangerously. So Ukip fares well in the European elections, but does not improve on its second place in 2009. Chilcot admonishes Tony Blair personally for too much sofa government and too many easy assumptions, but does not find a conspiracy deliberately to mislead by the American and British political elites. And finally the Scots conclude the risk of breaking away outweighs the romance of independence. The solidity of British political institutions is once again confirmed.

Yet whatever the outcome, all the political parties face their own challenges in navigating these events, challenges that will reveal their readiness to govern. For the Conservatives the task will be not to panic if Ukip does very well in the European elections, driving the Tories into third place. The 2009 benchmark for Ukip is 16.5% of the vote and a total harvest of 2.49m votes. If Ukip does substantially better this time, the Tory right will demand a commitment to an in-out referendum in the 2015 manifesto, the use of the Parliament Act to force through James Wharton's private member's bill on a referendum and ever tougher policies on welfare and immigration.

European elections have a noble history of delivering such temporary bloody noses. In the 1989 elections, for instance, the Liberal Democrats came fourth behind the Greens, and it is not Caroline Lucas who is currently in coalition government.

The wiser heads in Downing Street will call for calm, and tell Ukip voters that "you have had your fun, made your point and now it is time to return to the fold, and get on with the business of keeping the Europhile Ed Miliband from No 10". But polling conducted for Alan Bown, the Ukip donor, suggests Ukip voters are not just ex-Tories, and many of those who have defected from the Conservatives will never return. Still worse, they are not driven by Euroscepticism, but by an attitude to politics.

Ukip's leader, Nigel Farage, will have to show after May that a Ukip vote in 2015 continues to be a serious vote. The aim is to show that in a small number of seats Ukip are the true challengers to Labour, the Liberal Democrats or even the Conservatives. It will use ammunition from the local elections and further polls in marginal seats to make that case.

For the Conservatives it will take the deftest of touches to lure back those Ukip voters, and yet not alienate the centre ground. The harder Cameron presses the immigration buttons, the easier it becomes for Labour to urge 2010 Liberal Democrats – the key to a Labour victory – to vote Miliband and throw out Cameron. Downing Street will require better management than shown so far to break out of this morass of anti-Tory tactical voting.

But Labour has it own internal management issues. Miliband will have to demonstrate by February that he is reducing the influence of the unions. Partial victory is within his grasp. He will also have to tread with caution through the Chilcot inquiry. His own hands are clean on Iraq as he was out of the country, but many big party figures – Tony Blair, Alastair Campbell and Jack Straw – will deeply resent it if he throws them to the wolves for electoral advantage. Some of Miliband's advisers see Iraq as one of the best ways of breaking with the legacy of the previous Labour government.

But a vote for Scottish separation in September would lead to even greater turmoil in the Labour ranks. It would mean the Scottish working class had upped sticks and deserted Labour. With Scottish MPs excluded from Westminster, Labour would struggle to form a majority government again.

However, Miliband's immediate task is to broaden the living standards agenda that he has brilliantly developed and turn it into a compelling argument about the future prosperity of the country. Labour strategists know the party will come under relentless attack about the return to growth, and the two different big judgments George Osborne and Ed Balls made in the wake of the 2010 election. If the election is as much about the best response to the crash of 2008 as the shape of Britain in 2020, Labour loses.

A lot of policy work will finally bear fruit – the Adonis commission on industrial growth, the Lyons review on house building and the IPPR thinktank's report on the condition of Britain. Labour will use these cards to argue the Tories are creating a false recovery based on consumption and debt. On this economic issue, unlike the deficit, Labour can also create a vital wedge between the Tories and Liberal Democrats as Vince Cable, the Liberal Democrat business secretary, has deep qualms about a recovery built on a house price bubble.

But Osborne will spend the autumn using every political device to try to pin shadow chancellor Ed Balls down on whether he will aim for a surplus by the end of the next parliament, and whether he will match coalition deficit cuts after 2015-16.

The Labour lead remains at around 6%, but polling on economic optimism, the wisdom of the Tory cuts and political leadership are all starting to point in the Conservative direction. Miliband has shown more courage and guile than many expected. He will need even more to stay ahead in the year to come.

Patrick Wintour, political editor

Economy: the obstacles to growth, at home and abroad

A recovery in Britain's fortunes during 2014 will be matched by a desperate argument over how much the economy should be weaned off the emergency measures put in place after the financial crash. Chief among those measures are the ultra-low interest rates that have prevented thousands of businesses and households from going bust.

By the autumn, officials at the Bank of England could be facing serious questions about when, and how much, rates should rise, pushing up mortgage costs and further eating into living standards.

It was the governor, Mark Carney, who announced last summer that Threadneedle Street had set a target date of 2016 for a rise in base rates from the current 0.5%. Central bank officials linked a rise in rates to a fall in unemployment to 7%. But at the current rate of private sector job creation, unemployment could hit 7% in the summer.

Carney is likely to find an excuse for sticking to his schedule, mainly because he believes the economy is weaker than some headline numbers appear to show.

All eyes are on the Bank after the chancellor, George Osborne, stuck to his austerity-driven spending targets in the autumn statement last month. Osborne is under pressure to help his party survive the Ukip advance in the European elections in May and do his bit to keep Scotland inside the UK at the independence referendum in September.

He is likely to announce some goodies in his March budget to support colleagues in both fights, but within the current spending straitjacket. An expected rise in tax receipts could give him some room for manoeuvre.

By the end of the year, the longest fall in average living standards could be coming to an end. Notwithstanding a rise in interest rates, most analysts expect pay to start to rise faster than prices for the first time in five years. Osborne's problem will be arguing that a lopsided recovery favouring already wealthy, property-owning households in the south is worth voting for.

The Centre for Economics and Business Research thinktank says London will continue to outstrip the rest of country on every measure in 2014 – job creation, GDP growth, house prices – adding to concern felt by the business secretary, Vince Cable, that the capital "is becoming a giant suction machine draining the life out of the rest of the country".

Troubled economies such as Portugal and Greece are scheduled in 2014 to end their dependence on Brussels for new money, following in the footsteps of Ireland, which exited the EU's bailout programme last month. The euro crisis played a key role in undermining business confidence during 2011 and 2012. A recovery during 2014, after treading water in 2013, is likely to prove another factor in lifting the UK economy.

An end to central bank intervention in the US could be the most crucial economic event. Such is the weakness of the US recovery, the Federal Reserve has spent $85bn each month lending to banks and other financial firms in need of artificially cheap money. The funds have gone mainly into the major banks, in part to help them offload their dodgy loans. The Fed boss, Ben Bernanke, has signalled that 2014 will be the year he switches off the life support machine, leaving the US economy to survive on the near $3 trillion of central bank funds already swimming around the system.

With a large proportion of UK exports heading across the Atlantic, a resurgent US economy is good for UK exporters. But a booming US economy could also attract much of the investment funds that have flowed to the UK following the crash, hitting the value of the pound and raising import prices and inflation.

The Bank of England has pledged to keep inflation near its 2% target. If it rises, Carney may ignore the problem, much as Lord King, his predecessor, did in 2011 when it breached 5%. Colleagues on the nine-strong monetary policy committee may not be so flexible. Either way, Britain would face difficulties, either from high inflation or the knock-on effects of quelling inflation, even before unemployment has fallen to 7% and living standards are climbing.

Phillip Inman, economics correspondent

Arts: Scotland and Shakespeare steal the show

1 Scotland awaits The cultural programme surrounding the 2014 Commonwealth Games in Glasgow will fizz with an added energy and political urgency as they are set against the independence referendum on 18 September.

In the programme, theatre, dance and circus come together in Grit, director Cora Bissett and playwright Kieran Hurley's ambitious site-specific production based on the life and music of one of Scotland's most innovative and influential musicians, Martyn Bennett. It will be staged in Glasgow's Tramway One, then on Mull during a midsummer weekend. Artist Phil Collins will screen a new film about Glasgow accompanied by a specially commissioned live score in Queen's Park on the south side of the city, while the National Gallery of Scotland is one of the venues for Generation, a look at the last 25 years of Scottish contemporary art. In Edinburgh, Mark Thomson dramatises the 1707 Act of Union in a romp that takes in characters from Daniel Defoe to Queen Anne.

2 The Vikings are coming! For those who missed Pompeii, fear not, the British Museum has another blockbuster on its way. Its exhibition on the marauding Scandinavians will showcase the new gallery in the most spectacular way – with a real longship. From 6 March to 22 June.

3 Shakespeare Part II Celebrations for the bard's 450th birthday started last year but will culminate on the actual day in 2014, 23 April. Lovingly carved by master craftsman Peter McCurdy and his team from pine and oak, the beautiful Sam Wanamaker Playhouse at Shakespeare's Globe in London will stage its first production, the Duchess of Malfi, from 9 January. The intimate and atmospheric theatre will offer a glimpse of how audiences originally experienced the bloodthirsty Jacobean tragedy when it was first performed by the King's Men – Shakepeare's own company. Bardolatry will reach fever pitch in March with Shakespeare Week, while Stratford-upon-Avon will celebrate its favourite son with special performances by the Royal Shakespeare Company in April.

4 From comic opera to Greek tragedy Glyndebourne is staging three new productions this summer: Mozart's La Finta Giardiniera, Verdi's La Traviata and Strauss's Der Rosenkavalier. The relationship between Richard Strauss' life and work will be in the spotlight this year, as celebrations for the 150th anniversary of his birth take over the classical world. Was he a modernist radical, an old-fashoined romantic, or a Nazi sympathiser? The hot ticket in contemporary opera is Julian Anderson's Thebans at the ENO (14 May to 3 June). Directed by Pierre Audi and conducted by Edward Gardner, it's Anderson's most ambitious work yet – can the imaginative composer bring to life the epic, murderous, and incestuous family story of Oedipus, Jocasta and Antigone?

5 Avant-garde heroes old and new Film director, painter, set designer, gardener, gay activist: Derek Jarman was a modern Renaissance Man. Two decades after his death, various events celebrate his prodigious artistic output and legacy. As Tilda Swinton, Jarman's protege and collaborator who appeared in seven of his films including Caravaggio and Edward II, said, "It's important for those who weren't around at the time to know that he was not just some arty type who only a few people were ever aware of and want remembered now. He was a proper tabloid figure in the 1980s, involved in constant argy bargy with moral arbiters like Mary Whitehouse … truly gleeful about his role as public provocateur." At King's College London, where Jarman was a student, immersive exhibition Pandemonium includes rarely seen Super-8 films and elaborate notebooks, while Tate Modern is screening his final film, Blue. A silent, monochrome 75 minutes, it caused quite a controversy when it was broadcast on Channel 4 in 1993, the year before his death from Aids. An artist who shares something of Jarman's anarchic spirit is Marina Abramovic. The performance art pioneer has walked the Great Wall of China, danced with Jay-Z and been the star of Robert Wilson's opera The Life and Death of Marina Abramovic. In one of the biggest events of the art calendar, the global phenomenon In one of the biggest events of the arts calendar, she will be at the Serpentine this summer. The performance art – and the queues – promise to be epic.

6 Worthy successors? How to top the Rolling Stones? Well, Arcade Fire are none too shabby as this year's headliners at Glastonbury. The Canadian band have a formidable live reputation, and should have little problem in getting Worthy Farm moving to the African-Caribbean rhythms of new tracks such as Here Comes the Night. David Bowie guested on the latest, more experimental, dance album Reflector, so expect more of the will-he-won't-he rumours. An appearance by the Thin White Duke? Now that really would trump the Stones.

Liese Spencer, arts editor © 2014 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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