The Quarterly: New economic environments


The political battle for Britain’s economy: facts or feelings?

The political battle for Britain’s economy: facts or feelings?

Governments are elected, or deposed, on the basis of the economy. However, the choice is often not between two radically different economic approaches but rather voters’ feelings about their personal financial situation. The next election will see two analyses of the economic situation presented to the British people, who will be asked to decide which they believe, and who they trust to look after the economy after May 2015.

Chancellor George Osborne’s strategy is built around a steadily improving economy, with the promise of more to come if the voters allow him to keep his steady hand on the tiller. His opposite number Ed Balls lacks the Chancellor’s air of responsibility but is trying to make up for it with an appeal to the personal feelings of voters about their own financial situation. Which agenda wins the day will be a matter of numbers, but also of emotion.

Ronald Reagan understood the importance of appealing to feelings at the 1980 US Presidential Election asking “are you better off than you were four years ago?”, a question to which he hoped the answer was ‘no’, with the result that the incumbent Jimmy Carter was rejected by the public. In 2015, Labour will be looking to pull off a similar trick.

Looking at the headline numbers, the Conservatives appear to have a decent story to tell. “Britain’s economic plan is working”, declared Mr Osborne once again as he opened his budget speech on 19th March forecasting another increase in growth to 2.7% in 2014. With interest rates at historic lows, unemployment under control and inflation very low in comparison to periods in living history, he could be forgiven for expecting a national mood of optimism.

The public certainly seem to be granting him credit for his stewardship: as the economy improved over the course of 2013, polls suggested the public increasingly rated the Conservatives as the more economically credible party, ending the year 5 points ahead of Labour on the economy, having begun the year a point behind.

Labour will hope sufficient numbers of people will feel the Government’s economic recovery is not delivering for them, and want a change. The following day, however, The Institute of Fiscal Studies backed Ed Balls’ claim of a 6% fall in absolute wages between spring 2010 and Autumn 2013.

The danger for Labour, though, is that even if they win that argument it may not be enough. They still have some way to go in convincing people their offer is the better one.

A YouGov poll published on 13th December found that 25% thought they would have been better off if Labour had won in 2010, 32% worse off while 31% felt they would be much the same. The figures were even stronger for the Conservatives when questioned on the broader economy, with just 21% believing the economy would be doing better under Labour, while 42% believed it would be doing worse and 26% thought it would be much the same.

Ultimately, though, what will matter is who people vote for on election day. And polls of voting intentions continue to show a poll lead for Labour, albeit reduced almost to nothing over the past year, in terms of the public vote at least. While they broadly give the Government credit for its  handling of the economy, they may not yet feel this entitles Conservatives to their vote. This in turn is what prompts Osborne to emphasise that the challenge is far from over.

So both sides may have more to do to reach hearts and minds, regardless of where the numbers fall. The Prime Minister and Chancellor have begun 2014 appealing once again to voters’ good sense and understanding of how to run a household. For Labour’s part, while their cost of living agenda resonates well with the public at present, if wages begin to rise, the two Eds will be left with the unwelcome task of trying to tell people they are poorer than they feel.