As we look forward to what effect the budget has on the polls, here’s an updated look at what they’ve done in the past. The graph below shows the government’s lead in the two YouGov polls before and after each of the last ten budgets (for the most recent budgets, done in the era of daily polling, I’ve taken the average government lead in the two weeks before and after the budget).

Effect of budgets on opinion poll leads

As you can see, the idea of governments getting “budget bounces” hasn’t really hold water in recent years. Most of the time budgets don’t have much of an effect at all. The exceptions were Alistair Darling’s budgets in 2008 and 2009 when his speeches brought home exactly how dire the economic situation was and had consequentially horrid effects on the government’s poll position.

George Osborne’s first budget in June last year appears to have produced a very short term boost for the government, but it was (a) only minor and (b) lasted all of a week.


120 Responses to “On budget bounces (or lack thereof)”

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  1. @Adrian B
    I consider your emphasis on the importance of people’s individual experiences to be correct.

    However, you will have to look very hard to find any prediction by Ed Balls of a double dip recession. Balls hasn’t made one – quite cannily so because the exceptional weather factors that contributed to making Q4 2010 so exceptionally bad will cause Q1 2011 to be good when measured against it, so significant growth in Q1 2011 over Q4 2010 seems inevitable even if it’s just a dead cat bounce. Paradoxically, the effect of the severe weather this winter has been to make a double dip recession less likely, when measured by the “two successive quarters of negative growth” definition.

    The point instead being made is that GDP is now expected, by the OBR, to be consistently below levels predicted for 2011 back in June 2010, and that that shortfall isn’t down to chance but to Osborne’s fiscal stance. That seems to me to be a fair point. Others may disagree but, regardless, I cannot see how Miliband’s pointing out that GDP is already falling well short of this Government’s predictions is offering any longer term hostages to fortune.

  2. “And IF the economy does return to growth, which then accelerates, then Ed is toast.”

    Wishful thinking on your part Robert. If growth accelerates (not much chance of that!) then people may wonder why the bankers have walked off with the loot again. Distribution of wealth will be very important and the tensions in the coalition are bound to surface.

    Come on Robert – we all know that Labour is far from dead on any sensible political analysis. The same cannot be said for the ex-parrot known as the Lib Dems. Not just “pining for the fjords” anymore I am afraid!

    Wait for results of the locals and then you’ll start to see the scale of the difficulty the Lib Dems face. And the tragedy of the Lib Dem position is they have no room to turn things in their favour. It’s over. Many of us said it when they made the deal in May 2010 and I have seen nothing at all to change my mind.

  3. @ Adrian B

    You’re right that it is everyday bread and butter things that matter – employment, real wages, petrol and food prices, mortgages – not abstract figures like deficits. Households have been shielded from much of the pain of the recession so far by things like lower VAT (in 2009), lower interest rates, lower than expected unemployment compared with previous recessions. All of this has been bought through one-off boosts that were not sustainable – every time it has been one last injection before going “cold turkey”. That is the phase we have avoided – until now.

  4. @ Éoin

    I’m guessing we have to visit your website (by clicking on THE GREEN BENCHES name) to find out why you think this is the best budget in 5 years.

    It was mainly hot air to me.

    I am eagerly awaiting the detail of his planned tax/ NI merger. All those self-employed & unincorporated business chaps having to pay the same tax as the rest of us… that’ll go down like a lead balloon with traditional Tory voters.

    If the composite rate applies to pensioners, with no mitigation, the much trailed flat rate pension will not look quite as generous as it does now.
    8-)

    8-)

  5. @ LandOCakes

    Are you a Shetlander? If yes, I like your ponies. ;-)

  6. Amber

    “If the composite rate applies to pensioners, ”

    GO said in his speech that pensioners wouldn’t pay more tax as a result of the proposed merger.

  7. @ IANANTHONYJAMES

    I never said Labour was dead, but Miliband and Ed Balls will be. Agreed the local elections will be disastrous, but there is not much we can do about that other than manage expectations. Obviously any party that has to make cuts because the public finances are up the spout is going to be unpopular in the short term. That is hardly our fault. It is what happens in the longer term that matters.

    “Distribution of wealth will be very important and the tensions in the coalition are bound to surface.”

    Which is where the £10,000 personal allowance comes into play. What if it were £12,000 or even £14,000? The Lib Dems will be able to make it quite clear they want that, rather than a Tory cut to the 50p tax rate. Don’t you think that would be popular, distinctive and fair, as well as making a major difference to lower paid families?

    It would give us some “clear yellow water” to p**s into the Tories’ tent from outside.

  8. On the “cleaning up mess left by Labour” shtick.

    This afternoon Carolyn Quinn interrupted Danny Alexander at the very start of the interview:

    “Can I just stop you there?
    We have a lot to get through today and don’t really have the time for you to insert that into every answer, we’ll just take it as read.”

  9. @ Billy Bob

    OK so there was no financial mess left by Labour, eh?

    So how come, after experiencing EXACTLY the same global recession, Germany is booming, has 3.5% deficit and rapid growth without massive public spending splurges, while we have 11% deficit and what is left of our real economy goes cold turkey when there is even the slightest hint of restraining government expenditure. Compare and contrast: good economic management over the last decade versus complete pig’s breakfast.

    Looking at the polls I think the public know it is Labour’s “shtick” that is belied by reality, not the government’s.

  10. 23/3/2011

    Con:36 Lab:42 Lib:10 Other:11

    Govt. App: -20

  11. Also about the “On the “cleaning up mess left by Labour” shtick.”:

    If you’re going to bang on and on about it, then voters will more reasonably expect a good job to be done about it by time the term of office is over (assuming the government doesn’t fall too much before the planned next GE) – if the current incumbent can’t solve the problems satisfactorily, without causing some other big problems, then that isn’t much of an re-election pitch.

    If things don’t look like getting much better quickly, the “mess” complaint needs to be toned down.

  12. Amber,

    I didnt review the budget sorry… :(

    I spent the afternoon with Catháil [wee man]…

    I am a proud deficit denier [very proud] I think the Murphy’s Byrne’s Darlings.. Osbornes of this planet are all as daft as each other…

    Was Ozzy Osborne’s daftness any worse than Darling’s? No.

    I liked the 250,000 apprenticeships
    I liked the 12/24 technical colleges
    I liked the PTA…

    I still hate VAT, Tuition fees etc… But Darling and Mandy were planning that guff anyways…

  13. Thanks Liz,

    I was hoping someone was going to mention that!

    @Phil,

    Yes, Balls is being sensible – never predict a recession (Maude did it once in 1998 and that was the end of him). Just talk about a slowdown. And I don’t know where @ Colin and @ Robert C think this “accelerated growth” is going to come from. According to the govts own “best case” figures we are expecting almost stand-still growth (around 2%) for the whole of the parliament.

    I still await Q1 fgs with anticipation though …

  14. @all

    The figures for weeks 41 to 44 of the Coalition, covering the period 2011-02-10 to 2011-03-09 have been released. Apologies for the delay. The links are below.

    * Historical_grid_all_week: h ttp://www.flickr.com/photos/[email protected]/sets/72157625484534863/
    * Grid_all_week: h ttp://www.flickr.com/photos/[email protected]/sets/72157625478048341/
    * Term_yellow: h ttp://www.flickr.com/photos/[email protected]/sets/72157625645211058/
    * Term_blue: h ttp://www.flickr.com/photos/[email protected]/sets/72157625617047896/
    * Term_gray: h ttp://www.flickr.com/photos/[email protected]/sets/72157625491334241/
    * Term_red: h ttp://www.flickr.com/photos/[email protected]/sets/72157625645207632/
    * Term_all: h ttp://www.flickr.com/photos/[email protected]/sets/72157625491341803/
    * Raw_all: h ttp://www.flickr.com/photos/[email protected]/sets/72157625484575847/

    The next figures will be for weeks 45 to 49 of the Coalition, covering the period 2011-03-10 to 2011-04-06. They are scheduled to be released on/before 2011-04-17, subject to known hardware problems being resolved.

    Regards, Martyn

  15. @Colin
    “Portugal going down the same tubes as RoI.”

    Portugal’s PM has resigned as he couldn’t get his budget through.

  16. Perhaps we can test the “deficit denial” theory in Portugal.

    If we don’t have austerity measures, what happens…

  17. This is the fourth round of cuts in Portugal? Just like Ireland denied their deficit, and didn’t implement widespread austerity?

  18. Actually the more I read about this budget, the more unpalatable it seems. It’s nowhere near as bad at the Irish-style austerity budgets, but still that’s not saying that much, and it is obvious that a few extra measures of austerity have been postponed. I doubt it will give the government much of a boost at this rate.

  19. Cut corporation tax?

    That’s a budget for growth?

    I like the talk of apprenticeships and I like the idea of effectively taking the cap of National Insurance. I would even put up with a reduction in top rate tax.

    Somebody once told me that the cost of collecting a higher rate plus a reduction in the amount declared outweighed any gain in having a higher rate of tax at all.If that is true, let’s have a flat rate with NI included and high tax threshold (a la Lib Dems).

    The big problem is in the global economy if it becomes impossible to tax large international corporations then we can only tax individuals, small businesses and indirect taxes. This will not be either progressive or fair, but until we work out how to do it, we are stuck with it. A higher basic rate with a higher threshold and no higher rate?

    Would it work?

    Gould alone knows.

  20. Martyn (and everyone)
    http://www.flickr.com/photos/[email protected]/sets/72157625478048341/

    This is a trial to see if it’s true that in the new system you don’t have to mess with the http bit, if you are registered.

  21. Yes it is true. That last post was instant with no moderation.

  22. What’s the %age of debt to GDP in Portugal?

  23. The gov (dis)approval has shot up by 5% ! Partly I imagine due to the Libya factor ((I originally typed ‘Lib factor’)) and perhaps partly due to the Budget announcments on fuel (but not yet sure of timing of the YG poll actually reflects this).

    Anyway that’s an astonishing leap.

    On the issue of merging tax/NICs. The Budget red book refers to it as integration of income tax and NICs…so there is wriggle room to avoid a full-blown merger. IMO getting rid of NICs will be hugely problematic. Every time this idea gets mooted it gets rejected e.g. on grounds it will cost the Exchequer.

    I see Lab are arguing that the North Sea oil companies will simply increase their charges to pay for the windfall tax. Surely a profit making organisation wouldn’t countenance this sort of thing, would it?

  24. It’s funny, Labour thought windfall taxes were a great idea when they were in power. But Tory ones can’t work, obviously, on account of how they’re, like, Tory and stuff..

  25. Mike N – the timings are such that the overwhelming majority of responses to the poll would have been before Osborne stood up, so this shouldn’t reflect reaction to the budget at all (though of course, most of the budget measures had already been floated in the press so it isn’t that cut and dried)

  26. Personally, I think one defininte mistake made by the last government was to increase the number of financial statments from one to three…. The endless analysis and reanalysis by the 24 hour media with nothing else to fill their schedules but a bubbling regurgitation of tosh from all sides…leaves me pretty exhausted.

    The important decisions were taken last June and November – this is nothing more than in-fill or a fill in budget.

    No one actually knows how the cuts will exactly impact upon the economy because this is the first time since the 1930s that we’ve taken cash directly from the poor in such large quanitites…as opposed to cutting investmeent….Maybe it did the trick then and that fact has eluded history…but one way or othe other we’ll find out.

    As for the cut in 1p cut in petrol duty….well we’ll see. I can’t see any dancing in the streets from my windows but maybe the party is going on elsewhere…I thought the conservative argument was that windfall taxes always result in a rise in costs elsewhere….but maybe I misheard.

    At the end of the day growth is lower and borrowing is higher.

    This is before the experiment begins in earnest. And as Mr Osbourne was happy to claim the responsibility for the better growth in the economy last September it would seem churlish not to give him the credit for the current outcome and future predicted outcomes….but the truth is this is an experiement and no one knows….

    The last time a government embarked upon a sereis of reforms and structural adjustments on this scale that I recall was in 1970. If that’s so we’ve roughly reached in the 1971 phase of the Heath government…and the u-turns started in 1972…

    In the immortal words of Bette Davis ‘fasten your seat belts it’s going to be a bumpy ride.’

  27. Neil,

    FWIW I think the Oil Company tax looks good to me.
    I hope the the party leadership support after looking a the detail which they have to do of course.

  28. Oops, realised that I got my earlier comment slightly incorrect…the Budget red book refers to integration of operation of income tax and NICs. Which opens up even more wriggle room.

  29. AW – Thanks for clearing that up. My memory isn’t what it was.

    Ann in Wales. Sorry you didn’t appreciate my little quip. I somethimes forget how seriously some people take life.

  30. Still no sign of the Angus Reid tables:

    http://www.visioncritical.com/

    I get sick and tired of these firms who consistently break the BPC rules. Populus are the worst, by a country mile.

  31. Israel assault on Gaza: form Sunday till 11pm yesterday 17+ airstrikes & 60+ missiles launched – Palestinians: 10 killed & 43 wounded

  32. Only time will tell as to whether this budget has the effect that GO hopes it will have. Growth is in low numbers right up to the next election but then the last thing we want is another boom with growth figures of 4 or 5%, with people spending money on credit cards (ie that they don’t have) again. A nice steady 2.5-3% will do me nicely and one that is built in industry, not rising house prices, which is illusary unless you are going to sell up & live in a tent.
    Robert Choate on Newsnight made it clear that most of the announcements made yesterday had not taken into account in the revised forecasts, as it was not possible to gauge at this stage how big the effect of them would be. eg the relaxation of planning rules. Perhaps this will have no effect at all, or perhaps by 2014 it could have had a major effect.

    So whilst many of the announcements are for the medium/long term then, they should ultimately be positive, but to what degree? That question can’t be answered for some time.

    In terms of presentation by DM, I would certainly say he has been having coaching lessons on presentation & he seemed very confident. However he has got to acknowledge that AD would have had a very similar budget and stop criticising things they would have done themselves. In my view that makes him look shallow. He should adopt more of the mantra, ‘praise where praise is due & criticism where it is due. Asit was he seemed to be against absolutely everything.

    DAVID B Yes, the mess was caused by bankers, who were allowed by slack regulation to do what they did. Who was in charge of regulation? GB. So much of the blame does lie at Labour’s door. Also, they were weak when it came to negotiating the terms of rescue, remember Lord Miners (Apologies if that’s the wrong spelling, haven’t time to look it up).
    What should have happened was what they did with Rolls Royce in 1971 when it was going bust, they let the old company go bust & went forward with RR (1971) Ltd. That way all the old bonus contracts etc etc would have been dead & Fred the shred wouldn’t have got his ludicrous pension & the shareholders would have taken the hit not the taxpayer.

  33. I have pruned some tiresome partisan silliness. Hands up who would like to go on the naughty step? Anyone?

  34. Sorry if this is off topic but interesting non the less.

    Here’s an expenses scandal story I hadn’t heard of before.
    The actual overclaim was nearer half a million but only 345000 could be proved.

    http://uk.news.yahoo.com/21/20110324/tuk-ex-mep-must-repay-345-000-expenses-6323e80.html

  35. NICKP

    “If we are limping along with barely any growth all year, who will be to blame?”

    Your time frame is way to short.

    Its going to take the full parliament to get our deficit down to double digits rather than three digits.
    Our total debt will just have started nudging below 70% of GDP at £1.36 Trillion

    This is a five year plan-look for instant solutions if you wish -but it’s a waste of time .

    Politically this was always going to be a battle of timescales-Labour short; Government long.

    I was reading yesterday how GO fought tooth & nail in the Coalition negotiations for the five year fixed term.

    He knew how long this mess was going to take to sort out.

  36. I shouldn’t bother. This is going to be a one-sided discussion, apparently.

  37. Interesting viewpoint on raising interest rates here from Lucas Hodorovsky at Western Union, who suggests they may fuel the recovery not quash it as many assume:

    “In a Different Light

    Like pop phrases, political rhetoric and scissors, running with ‘something’ for lack of thought is a mistake. In economics, using rhetoric and not questioning the underlying validity of the statement because it sounds ‘right’ can be harmful, if it distracts from a real solution, and often self fulfilling, if it gains traction in the mainstream. Raising interest rates is one mechanism by which central banks suppress economic output by raising the cost of borrowing and thereby reducing excessive capital investment. Under ordinary circumstances, this straightforward process attracts little political attention. Unfortunately these are difficult times and the bank, which itself is made up of diverging opinions, is stuck between violently opposing interests. At the turn of the year, economic indicators had exposed weaknesses in the UK economy and indicated a slide into recession was a possibility if the incorrect policy approach was applied at that critical juncture. Fortunately more recent data suggests that theory was a bit exaggerated. That is not to say recent news is all ‘sunshine and unicorns’ but clearly not a journey to ‘the thunderdome’. The most widely accepted conclusion about monetary policy in our present circumstance- raising interest rates would deal a potentially fatal blow to the UK economic recovery-does not seem to have been thoroughly examined in the broader media.
    The latest credit conditions survey suggests that credit supply has been weak but also that demand has been inconsistent. Lending has increased under Project Merlin but at a greater cost to the borrower which cleverly reduces aggregate lending and consequently UK’s banks credit exposure. Increasing the benchmark rate by 25 to 50 basis points would effectively curb excessive borrowing, should conditions rebound unexpectedly and feed through to consumer and business sentiment, without creating prohibitively high rates for an expanding base of borrower. Public sector unrest and austerity unfolding has created the impression that the UK economy is grinding to a standstill but consider last weeks Claimant Count Change, posting at -10.2K vs. +1.2K expected, European and indeed UK markets are up, considering the events in Japan, and manufacturing outlook in the UK is continuing to rise. When accounting for these elements, an increase in interest rates and the subsequent appreciation of the Pound may serve to shield UK consumers from imported inflation and result in the very economic expansion the rise in rates is purported to quash. Today, markets will be eagerly awaiting the release of MPC Minutes to ascertain whether yesterday’s appreciation of Sterling was indeed justified.

    Cascade

    The Kobe Earthquake, who’s destruction was approximately 100billion USD or 2% of GDP, interrupted economic output for one year after which time imports had fully recovered and exports were at 85%. The destruction attributed to the Tohoku Earthquake is estimated to be between 122 and 235 Billion USD or 2.5% and 4% of GDP. Unfortunately the proportion of the cost that falls on insurers versus households tops out at 33 Billion USD in contrast to 783 Billion USD during the Kobe disaster. The impact that will have on emerging nations, or for that matter developed nations, is very difficult to gauge at these early stages. But if history is a guide, Japan will rebuild quite quickly. One can hope Japans voters will compel its political class to reform; on whom the, economic malaise of the past years, the sub-standard nuclear oversight and implied complicity in the nuclear episode, will be blamed. They are guilty after all, not in action but inaction. On Monday, the World Bank released a report stating that real GDP growth will be negatively impacted through mid 2011, which strikes me as optimistic. There are reports throughout emerging nations that supply chains will be affected for some time to come and has caused an upward revision of costs for tech and automotive firms. On the other hand, this may temper a wildly expanding region and promote more well-proportioned growth in the world economy at the cost of higher luxury good prices. The current EUR strength/USD weakness may be with us for some time longer as analysts reassess the value of emerging market equities.”

  38. 5,000 US Marines on their way to Libyan waters… [essential to maintaining NFZs you’ll understand]

  39. I have a question that someome more knowledgable may be able to help with.

    I know that much of the extra £48/9Bn borrowing over the lifetime of the parliament is due to higher inflation.
    I know this means in effect that current (and past) borrowing is less as a %age of GDP.

    (we have discussed so-called benign inflation in the past)

    As such is it the case that this extra debt does not prospect of achieving the eliminating the structural deficit by the end of the parliament?

    I ask as it appears as an easy stat for the opposition but in fact it isn’t.

    In fact if Labour’s slower plan was in place it would be a more debt on top. (how much by is an argument not for here)

  40. @Eoin,

    Which 5000 marines are those? Do you mean the USS Kearsarge and USS Ponce? Or has there been an announcement of additional marines heading there?

    The Kearsarge seems to be there to take care of pilot extractions using VTOL planes, so yes an essential part of the NFZ deployment.

  41. There is also a naval blockade in place to enforce UN sanctions.

    Hopefully we will see a humanitarian aid effort mounted from the UN naval resource.

    WH said this morning that there are 80,000 displaced persons inside Iraq.

    The situation in Misurata is awful, with Gadaffi snipers picking off residents if they leave their houses. Tanks continue to shell the town.

  42. JIM JAM

    The Budget Red Book still claims that the Structural Deficit will be eliminated by 2014/15-quoting the OBR report.

    So the slippage since 2010 Budget which increases the 2014/15 Deficit & the Total Debt at end 2014/15 has presumably been attributed to cyclical factors.

    Don’t know if that helps.

  43. Winter fuel top up payments not to be renewed.I wonder how long it will be before the whole thing is axed?

  44. This is a very interesting analysis, and good food for thought. However, to be seriously meaningful the analysis would have to include other relevant variables, such as whether the Chancellor was taking money out of the economy or putting money into it.

    In recent years Chancellors have had far less scope for initiative than in the past becasue of external economic factors. Indeed, in the latest budget the Chancellor to my mind seems to be “frozen in the headlights”, not knowing which way to go between urgent and conflicting pressures to reduce debt, to promote economic growth and to reduce inflation.

    My suspicion is that most ordinary electors know that recent Chancellors have lost control over the economy, in which case their budget initiatives are unlikely to have lasting psephological effect, as Anthony’s analysis of the polls would seem to confirm.

  45. I wonder how long it will take for the effects of the budget to transfer to the polling figures?

    I also think the march for the alternative will be an interesting gauge of public opinion this weekend.

    I would be surprised to see the Tories polling more than 30% from next month onwards

  46. @ Colin,

    So GO was pressing for five year fixed term parliaments so that they had time to sort out the economy!!

    Great to hear such a fundamental constitutional shift was decided upon because of Tory party electoral self-interest.

  47. For those that are interested in elections elsewhere, it seems that Canada is heading for a general election this spring, due to a vote of confidence which the minority incumbent cannot win without support.

  48. STEVE I would be surprised to see the Tories polling more than 30% from next month onwards.

    Interesting prediction; your evidence would be…?

    The reason I think that the Tory polling VI has held up quite well (36% at the GE, 35% now) I think relates to the fact that most who voted blue knew what they were voting for. They understood that there was a financial problem & they understood that if you earn £2kpm & spend £3k pm, you can only do that for so long, financing with extra credit cards etc, before you have to rein yourself in. That is what this government is doing for the country’ sake., so they are taking the medicine they expected to take and therefore still support the blues.

    Red percentage has increased almost exclusively from left leaning LD’s many of whom only voted LD tactically. What will they do in the future? No one knows but it is the reason that the red lead is must be regarded as fairly soft.

    At some stage EM has to come out with a strategy and not just oppose everything the coalition does. I’m not saying he needs specific policies at this stage but rather, what is his vision?, what does he stand for?, is he Kinnock Ed or Blair Ed?. In GE terms, the former was a loser, the latter was a winner. He can’t be both at the same time.

  49. @robert c

    Delusional isn’t the half of it – I fear it is The Lament of the Dying Lib!

    First quarter growth may reach 0.4% – I doubt it – may be 0.2% – given the quarter with which it was compared – this is dreadful and all but a double dip.

    No-one forecast a double dip – Ed B said there was a threat of one – pre-election but since they have been careful to talk of decline in growth – and decline in growth there certainly is.

    In fact I think the Labour party are actually quite shocked at just how bad things are so quickly and all of this before the major tranche of the cutting has begun.

    I fear the impact of the cuts has also been grossly under-factored by the OBR – I predict growth this year at under 1.5% – probably 1% – possibly none at all – and next year something similar,

    The future is rising unemployment, imported inflation at 5% and waves of public sector strikes against the assault on pension rights and de facto ten percent wage cut sustained in the two years of this government. We will see how Lib-dems stay the course then as their poll ratrings hit 3-4 % and the UKIP hit double figures and the Tories struggle in mid-twenties.

    Oh yes – I nearly forgot – and the budget deficit does not decline at all – because of lower than expected receipts and higher benefit levels.

    -Just in time for the Olympics! And the 2012 conference season!

    For Lib-dems this year will be as good as it gets this parliament – and this year will be a disaster for them. Their own doing entirely!

  50. Robert,

    I think you are basically right and add that a little LD vote has gone Con but been matched by Con-UKIP most of which will vote con at a GE in seats that matter.
    So the con vote is probably around 38/9% really at the moment.

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