Britannia Radio

People are puzzled by the ever-worsening economic news combined with
an improvement in Labour’s standing in the polls. This analysis
from a highly respected source attempts to answer that conundrum and
paint a possible scenario for at least the first half of 2009.

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UK POLLING REPORT 19.12.08 

http://ukpollingreport.co.uk/blog/
The abyss ahead of Gordon Brown…
Posted on December 19th, 2008 by Anthony Wells

The polls are now showing levels of support that would result in a
hung parliament that would, given the maths, almost certainly produce
another Labour government. However, expectations continue to be that
Labour will lose the next election. As I type the bookies still have
the Conservatives as the heavy odds-on favourite, betting spreads
have a Tory majority, the last time the PoliticsHome panel of MPs,
political journalists and so on were polled 40-odd percent still
thought there would be a Conservative majority, even left leaning
pundits like Michael White in the Guardian are saying they still
don’t expect Labour to win. Why?

I can’t claim to know the mind of punters or pundits, they may all
simply be in denial, but I suspect the reason is because they expect
the economic situation to eventually sap the government’s support.
Unless they expect a substantial recovery in the economic situation
next year, they are probably right to do so: let’s look at the
figures.

The simplest thing we can say is that people are very pessimistic.
Asked if the economy is getting better or worse people are
overwhelmingly negative - in MORI’s lastest poll 66% expected the
economy to get worse next year. This is, however, a bit of a
statement of the bleeding obvious. To get any thing useful we need to
look a bit beyond that, and that reveals two interesting gaps between
expectations and what is likely to happen.

Firstly, there is a sharp contrast between people’s expectations of
their own families finances and that of the country as a whole. The
difference is sharpest in Populus’s questions - the net score for
expectations of the economy as a whole is minus 35, for “me and my
family” it’s plus 7 (51% think they personally will do well in the
next 12 months, 44% badly). In TNS’s regular surveys of consumer
confidence for Nationwide the net score for the public’s expectation
of the economy in 6 months is minus 23, but for people’s own
household it is exactly neutral (16% think they’d be doing better,
16% worse).

Some people of course won’t suffer, mathematically its theoretically
even possible that most people won’t, if a few big losers outweigh
many small winners. Realistically though we have a gap between
expectations and reality here - people think the economy is headed
for disaster, but they and their family will manage to buck the
trend. While some will be right, the chances are an awful lot of them
won’t be. Reality check one.

The second is the upturn in economic optimism. While all polls show
people very pessimistic about the economy, almost all the trackers of
public confidence in the economy show it heading upwards since the
summer. Specifically, many show a big spike around the time of the
bank rescue plan (see, for example, MORI or this TNS data).

This also, of course, co-incides with the Labour government’s
recovery in the polls. This isn’t as obvious as perhaps it sounds,
when polls have asked specifically about whether the PBR, say, will
improve the situation very, very few say it will make a big
difference. The recovery in economic confidence though tells the
underlying truth; people may not be able to point at a specific
policy and say it will solve things, but collectively the
government’s actions have served to convince some people that things
are getting better. It suggests that Labour have recovered in the
polls not just because people have seen Gordon Brown looking more
capable, purposeful and at ease with himself, the Labour party more
united, or have looked to experience in a crisis. Support for Labour
has increased because people think the action they’ve taken is
actually working.

Here then, is the problem. If the government’s increased popularity
is due to people thinking their policies will work, what happens if
they don’t? And on what criteria will that judgement be made?

If the criteria for success was avoiding a recession or major job
losses this would be an easy exercise with a very bad answer for
Labour. Thankfully for Gordon Brown, that’s not the yardstick
he’ll be judged by. We know the public expect a recession, we need
to judge how deep their expectations are - for that we need to look
at questions asking what people think about the economy in the
future. Going back to the TNS data for Nationwide, asked about the
current economic situation 76% think it is bad, 15% normal and 9%
good – this has been on a steady downwards trend since 2007. When
TNS ask how people think the economy will be in 6 months time 45%
think it will be worse, 30% the same, 22% better - significantly up
from a few months previously. In other words, a majority of people
now think we’ve hit the bottom and a significant minority of them
think we’ll be on the up in 6 months time. In Nov 08 Populus too
found a significant chunk of people taking a more positive view: 31%
of people told Populus they thought the economy would do well in the
next year, up from 22% in July. MORI’s last figures are less
optimistic, but the optimists are there - 18% think things will get
better, 14% the same, so almost a third think we’ve reach the bottom
(again, significantly higher than in the Summer).

I’m not an economist, I’ve no particular way of knowing what will
happen to the economy next year, but I am not seeing any predictions
that next year will be anything but horrific economically. If that
does happen the chances are - though it is not a foregone conclusion
- that this will push economic confidence down again as reality hits
home. The thing that will do it is not the raw economic figures, but
experiences of friends and family, and the stories that make it real,
things like the immentient closure of Woolies and the job losses that
will entail, and the further companies and employers that we can
expect to go to the wall next year if the predictions are correct.

Will this necessarily be bad for the government though, surely the
recession has been good for Labour so far? There is a perception
that, whereas governments normally lose popularity when the economy
goes horribly wrong, Gordon Brown and Labour have bucked the trend.
That perception is wrong. Confidence in the economy started going
after the run on Bradford and Bingley - roughly the same point that
Labour’s lead vanished and the Conservatives moved ahead. Labour’s
position completely tanked in the months after the budget, at the
same time as economic confidence really began to fall through the
floor. The recent recovery in Labour’s position in the polls dates
from the bank rescue in October 2008, which has also seen a recovery
in economic confidence. The graph below shows the public’s net
expectations for the economy in 6 months time, from TNS’s monthly
survey for Nationwide (in blue), compared to Labour’s average lead
in the polls over the last 18 months or so (in red).


It speaks pretty much for itself. Brown’s government’s fortunes
are not defying gravity, they are tied to perceptions of the economy.
Since the bank rescue plan significant numbers of people have become
more optimistic about the economy and Labour’s fortunes have gone
hand in hand with that recovery in economic optimism. If that falters
I suspect Labour’s support might go the same way, and at the moment
all the predictions are that it will. That is the reason to think
that the forcecast for Labour isn’t as rosy as the actual voting
intention figures we are seeing at the moment would suggest.

The worst thing for Brown is that even if the economy actually does
do well, the economic pundits are all proved wrong and the British
economy bounces back strongly before any expects, he still isn’t out
of the woods. At that point, as Danny Finkelstein wrote earlier this
month, the public suddenly have much less reason to be risk adverse
and the “experience vs novice at a time of crisis” argument ceases
to work. It’s worth remembering that while polls now universally
show that Gordon Brown is more trusted than David Cameron to deal
with the present crisis, Populus still have Cameron leading as best
to “lead Britain forward after the next general election”.
Similarly, YouGov show Labour miles ahead on dealing with the economy
in the present crisis, but the Conservatives ahead on the economy per
se.

So, while the current polls are good for Labour, at least in the
sense they would probably end up the largest party if there really
was an election tomorrow, the problems ahead are daunting. Obviously
anything can happen, but the chances of a Labour victory are probably
lower than the raw voting intention scores would suggest - hence the
pundits and punters opinions I started the article with. However,
even if the economy does drag Labour’s support down again, it
doesn’t follow its going to happen straight away, or indeed that
Labour won’t rise further before economic reality hits home. If
Labour do get closer to the Conservatives in the polls (or indeed
overtake them) in the new year, then Gordon Brown really should call
an election there and then. Under the circumstances, he could win it.