Compare and contrast – Atul Hatwal writes that a Labour victory from the current position would be unprecedented, Dan Hodges writes that a Tory victory is still the most likely outcome of the election. On the other side of the political fence Paul Goodman writes that a Conservative victory is impossible and Matthew D’Ancona that Cameron is perilously close to blowing it. Peter Kellner has also written a scenario as to how David Cameron could win here, though I think he’s done it more as devil’s advocate than as a prediction!

They aren’t of course necessarily contradictory, it is not a given that somebody has to get a majority. I think the essential problem is that there are significant obstacles facing both main parties and, if you want to spin it that way, significant reasons why both sides “can’t win”. Equally, there are ways both sides could clamber over those obstacles with a bit of luck on their side. You may, at this point, want to get a cup of tea – writing about the problems of both sides, and why they might not be problems may take some time….

…Back with me?

To start with the Conservatives, Paul Goodman does a good job of identifying some of up the problems that currently stand in their way of winning an election. Firstly, there are several social groups where the Conservatives particularly struggle, putting a cap on their potential support – Paul mentions the failure of the Conservatives to win support from ethnic minority voters who demographically or attitudinally might be expected to vote Conservative but don’t, but one could equally well point to the fact that people in the north are less likely to vote Conservative, or the party’s collapse in Scotland. This is, in many ways a problem with the failure of the Conservative party’s modernisation. It’s hard and takes a long time with little in the way of immediate returns. Past Tory leaders have repeatedly been forced into appealing to their own core votes, decisions that were probably tactically correct in the short term, but which in the long term further entrenched negative views of the Conservative party that prevent them widening their support. To give a current example, I suspect the cut in the 50p tax rate probably didn’t do as much short term harm as people think (my guess is the budget damage came much more from the granny tax and the appearance of incompetence) because the majority of people already think the Conservatives favour the rich above normal people. It did, however, further entrench that view and makes it more difficult for the Tories to change it in the future.

If the Conservatives first problem is the limited upside to their support because they are still toxic to much of the electorate, Goodman’s second issue is UKIP – the availability of an alternative party on the right. I’ve written about UKIP’s support in more detail here. In short UKIP support does come disproportionately (though not exclusively) from the Conservatives and isn’t just, or indeed even mainly, about Europe. It is about immigration and general dissatisfaction with government performance or modern Britain. The biggest increase in UKIP support came as a result not of anything related to Europe, but as a result of the budget and the omnishambles period. In one sense I think Paul worries too much about UKIP here, in the absence of UKIP those voters would still be disillusioned and unhappy, they’d just find other outlets to register their dissatisfaction. Where UKIP’s presence does make it more of a problem is that, as Matt D`Ancona writes, it provides a gravitational pull on the right, meaning the Conservatives have to be wary of leaving too much space to their rear lest UKIP prosper too much. I do also ponder exactly how the Parliamentary Conservative party will react if UKIP come top in the European election next year and the inevitable spike in normal opinion polls that will follow a strong European election performance… especially if the election debates are being negotiated at the time. Having lost an election to Cleggmania David Cameron probably won’t want to risk Faragemania, but in the event that UKIP are ahead of the Liberal Democrats in the polls it may be difficult to argue that Farage should not be included in the debates.

The biggest problem for the Conservatives though is simply the high bar they need to get over to manage an overall majority. On a pure uniform swing the Conservatives need an ELEVEN point lead to get an overall majority. The more commonly cited seven point lead is based on a (reasonable enough) assumption that Liberal Democrat support will be down at the next election which reduces the sort of lead the Conservatives need.

Seven percent, however, is still a formidable lead to achieve to get a majority of just one. Tony Blair in 2005, Thatcher in 1979, Wilson in 1964, 1966 and Oct 1974, Heath in 1970, MacMillan in 1959, Eden in 1955, Churchill in 1951 and Attlee in 1950 all got overall majorities with lower leads than the seven percent Cameron achieved in 2010. The main reason the Conservatives didn’t win in 2010 is not the proportion of the votes they got, but how those votes translated into seats. Given the likely failure of the boundary changes, the situation will probably be the same at the next election.

I particularly dislike arguments based on “this has never happened before therefore it can’t happen” (beautifully parodied here), so the common argument you hear of “no government party has ever increased their share of the vote so the Conservatives can’t win” should carry little weight. There have only been 18 elections since WW2, and in 3 of them the governing party has increased their share of the vote. Those were special cases of course – they were short Parliaments, so they don’t count. If the Conservatives do increase their share of the vote then I expect this case would also be dismissed as a special case, because it was a hung Parliament, or because the third party’s support collapsed or whatever excuse people come up to make the data fit their rule. Nevertheless, it does go to underline the sheer difficulty of what the Conservatives need to achieve in order to win a majority.

Those then are the obstacles facing the Conservatives – they need an increased lead over Labour to win, yet the potential to gain new support is limited by the party’s toxic image and their existing support is being nibbled away by UKIP to their rear. How can they win from there?

First there is the question of whether the Conservatives really would need a lead of 7 points. Peter Kellner floated this idea in his piece this week, suggesting the Tories could win with a 4 point lead.

There are a couple of reasons why the Conservatives could outperform UNS in a election that was otherwise quite static. The first is that while one of the reasons for the perceived bias in the electoral system, smaller electorates in Labour seats, will remain at the next electon, another reason may diminish. One of the reasons the Conservatives win fewer seats than Labour on the same shares of the vote is that Labour and Lib Dem voters have historically been much more likely to vote tactically for each other. This means that in seats where the Conservatives get between 35-40% of the vote they normally fail to win the seat due to tactical voting against them, while Labour will often win the seat on the same share of the vote because their opposition is split between the Conservatives and Lib Dems. In 2010 there were 66 seats where the Conservatives got between 35% and 40%, they won 30 of them (a hit rate of 45%), there were 78 seats where Labour got between 35% and 40% and they won 47 of them (a hit rate of 60%).

We already know that the 2010 Lib Dem voters who are least likely to have stuck with the party are those who actually identified most with the Labour party, and who were presumably voting Lib Dem for tactical or protest reasons. Now, I am sure when push comes to shove some of those will end up holding their noses and voting tactically for the Lib Dems anyway – but some won’t, and if Labour identifiers are less likely to tactically vote Liberal Democrat at the next election than they were at the last election the Liberal Democrats will be losing votes where they need them the most and Labour will be gaining votes in seats where those votes are of no use to them… the effect would be to reduce the anti-Conservative skew in the system and deliver a Conservative victory on a smaller lead. We cannot tell if this will happen, it is practically impossible to predict tactical voting decisions in advance when people themselves probably won’t make sure decisions until very close to the election.

A second factor is the incumbency bonus. The Conservatives gained a large number of seats from Labour at the last election and in those seats they will have the benefit of a “double incumbency” bonus – that is, in most cases Labour will have lost the incumbency bonus their former MPs enjoyed at the 2010 election, while the new Conservative incumbents will have built up their own personal vote. In a largely static election or an election with a small swing against the Conservatives that will provide an extra buffer for Conservative MPs. A good example of this is the 2001 election. The election produced a 1.75% swing from Labour to Conservative, which should have resulted in the Conservatives retaking 15 seats from Labour, but because those new Labour MPs benefited from incumbency and the Conservatives had lost it they only took 5 (and managed to lose one the other way).

These factors mean the bar for the Conservatives may not be quite as high in practice as it appears in theory, but that is not much good if you are 10 points behind. To win the Conservatives need to retain the level of support they got at the last election and probably (assuming Labour gain at least some support – I’ll come to them later) gain some more on top of that. There are two reservoirs of potential extra votes for the Conservatives – people who voted Conservative in 2010 but no longer say they would and people who did not vote Conservative in 2010, but would consider it. Don’t make the mistake of assuming the Conservatives in 2010 were at their maximum level of support in 2010 and ignoring that second group – they are very real indeed. Looking at the big Lord Ashcroft poll from November, 16% of people currently saying they’d vote Conservative are people who did NOT vote Conservative last time round.

Not only is it possible for the Conservatives to get extra votes they didn’t get last time round, they are actually doing it. That 16% of current Tory voters is about 5% of people voting. Those voters come mostly from the Liberal Democrats and from 2010 non-voters, though there are also some people who voted Labour in 2010 who would now vote Tory. As to why the Conservative party has picked up these voters, back in July Lord Ashcroft did another big survey that segmented out the people the Conservatives had lost, gained and kept. The biggest defining factor for these “Joiners” as he called them were people who trusted the Conservatives more than Labour on the economy, or at least, trusted Cameron & Osborne more than Miliband & Balls. Ashcroft found a similar pattern amongst those who said they would consider becoming joiners (or “Considers” in his parlance) – their defining characteristic was that they trusted Cameron & Osborne more than Miliband & Balls.

So while the Conservatives undoubtedly do have a cap on their potential support due to their toxic reputation with some groups, the extra support is there to be won, and can be won on the basis of the economy and people’s preference for Cameron over Miliband. Other research by Ashcroft shows these Conservative joiners are also more socially liberal, more likely to be the sort of people who are attracted by Conservative support for things like gay marriage and, at this point, we come into conflict with the other side of the equation, the 2010 Conservative voters who the party has lost.

The Conservatives got 37% at the last election. Currently they are around about 31% in polls. Looking again at Lord Ashcroft’s poll from November, the two biggest chunks have gone to don’t know, won’t vote or won’t say or UKIP. Looking at Ashcroft’s segmentation, these voters tend to be people who don’t think David Cameron has performed well in government or don’t think the Conservatives share their values, yet who also have negative opinions of Labour and the Liberal Democrats and normally prefer the Conservatives to Labour. Ashcroft’s polling suggests the most powerful message to these lost Conservatives will be a tactical one – that voting UKIP would risk letting in Labour and Ed Miliband. While UKIP support is not mainly driven by the European issue, if David Cameron does come out with a strong message on renegotiating Britain’s relationship with Europe I suspect it could speak to their values and help them believe the Conservatives understand people like them, though I am conscious that allowing doubt over Britain’s future membership of the European Union to fester could be an extremely high risk strategy for the Conservatives.

Turning to Labour (and for those of you starting to flag, we are two-thirds through!) the arguments about the difficulties they face boil down to two. First there is the question of whether their mid term lead in the polls is really of the sort of scale that a successful opposition should be achieving. Secondly is whether their undoubted lead in voting intention polls is undermined by more lacklustre figures on things like Ed Miliband as a potential Prime Minister or economic trust (the latter is often tied up with lots of internal Labour party politics and positioning which I won’t get into!)

The general pattern for opposition parties is for them to gain support during the middle of a Parliament as people are disappointed or angered by the government and want to register a protest, either by telling pollsters they’d vote elsewhere or by registering protest votes in elections that they don’t see as mattering that much. As the election approaches incumbent governments tend to do more crowd pleasing things to win back support, and people tend to think of their vote more as a choice between alternative governments, rather than just a way of protesting against the incumbent, and almost always this results in some degree of swing back towards the governing party. This pattern was largely broken in the 1997-2001 and 2001-2005 Parliaments, given that Labour remained pretty popular throughout both and there were never big opposition leads to begin with. It re-established itself to a degree in 2005-2010.

Now, if we look back through history oppositions that have gone on to win the next election have normally enjoyed mid-term leads of 20 points or more, oppositions with lower leads mid-terms have generally ended up losing. By that yardstick, Labour isn’t doing well enough to win, this is not the sort of lead that winning oppositions tend to mark up mid-term. Just as with the “no government has increased its vote” thing I discarded earlier, just because no opposition has even gone on to win the election without getting their mid-term lead up to 20+ points, doesn’t necessarily mean it can’t be done. This time could be different, I’ve written about this at much more length here but there are two main things to consider. Firstly, the arguments about Labour not being far enough ahead assume they are not going to get further ahead in the future. Mrs Thatcher’s Conservatives weren’t miles ahead at this stage either, it was the winter of discontent that did that and pushed them over the top.

That’s an argument about events coming along in the future though, and they can cut both ways. A more interesting consideration is whether these are mid term blues at all or whether we are seeing a more substantial and permanent realignment of support. The vast majority of Labour’s increased support since the general election is not from people switching from the Conservatives, it is from people who either did not vote at the last election, or people who voted Liberal Democrat at the last election. I think the problem for the Liberal Democrats is much more serious than mid-term blues and the support that has moved from the Lib Dems to Labour may be a lot “stickier” than mid term support has been in the past. I wouldn’t, therefore, spare too much worry to the “Labour need to be further ahead” argument. In normal circumstances they would, but these aren’t necessarily normal circumstances.

What I think should be more worrying for Labour are the underlying figures on Ed Miliband and on economic trust. People’s preference for Prime Minister normally goes hand-in-hand with their voting intention. If you graph the two questions side by side they move pretty much in parallel, with the governing party normally doing a little better on the PM question as it is, after all, easier to look Prime Ministerial when you actually are Prime Minister. When IDS was Conservative leader the Labour lead in voting intention was, on average, 16 points less than Blair’s lead over IDS as best PM. When Michael Howard became Tory leader the gap between his performance as best PM and the Conservative VI lead fell to seven points. That shrunk to 5 point when David Cameron took over and once Gordon Brown replaced Blair the Conservative lead in voting intention was almost identical to the Conservative lead as best Prime Minister. With Ed Miliband that small difference has become a vast gulf, when I wrote about this last year the average gap was 18 points. Since then Labour’s lead in the polls has inched up a bit, but Miliband’s rating as best PM hasn’t. In recent month’s the gap between preferred party and preferred PM has been 20 points.

There is a similar but smaller gap on economic policy. There are all sorts of different ways that economic trust is asked – a straight question on which party people trust the most shows them neck-and-neck, whereas questions asking if people trust Cameron & Osborne more than Miliband & Balls show a lead for Cameron & Osborne. Either way, it is the same pattern of Labour leading in voting intention but doing less one on important underlying questions.

The question is whether this matters? Clearly, at the moment, people think Cameron would make a better Prime Minister and either prefer the Conservatives or rate the parties equally on the economy… yet Labour have a substantial polling lead. Clearly it isn’t a deal breaker! On the other hand, it could become more important and influential as the election approaches and voting decisions become more of a choice between alternatives than just a way of signalling dissatisfaction with cuts and austerity. Once again, we don’t know what will happen, and the present polling cannot tell us.

In closing both the Conservatives and Labour face obstacles, but neither’s are insurmountable. It is perfectly possible to come up with plausible scenarios where either side win – or to spin the figures to claim the other side cannot possibly win. Personally I am happy to admit I don’t know what will happen, there are too many big unanswered questions about the economy, the Eurozone, the debates, the European elections, how the end of the coalition pans out, and how public opinion evolves as the election approaches that it is impossible to make an informed prediction without. With some honorable exceptions, I suspect in many cases people’s predictions this early say a lot more about their own personal preferences or what political axes they have to grind against their party leaderships than what is likely to happen at the next election.

313 Responses to “Well, SOMEBODY has to win”

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  1. @Lefty

    A good analysis, and largely one I agree with, but I suggest it’s a bit incomplete.

    Before going further, I aplogise for massive overgeneralisation in my analysis below, but it can’t be avoided in a short note.

    I certainly agree 45-75 was a “golden age”. However, it contained the seeds of its own destruction.

    It was forged in misery and destruction: a depression sandwiched between two devastating wars. This led to (a) demobilised armies providing as a massive disciplined available workforce; (b) a world in need of physical reconstruction; and (c) a strong collective memory of hardship and mass unemployment.

    Work was there, workers were there, workers wanted to work. We cured unemployment. We cured poverty.

    And things got ever better and better, for more and more people.

    And people forgot that 1914 – 1945 ever existed.

    Workers firstly (in the 70s) realised the power they had in a world of full employment; subsequently they ceased to think of themselves primarily as producers, and for the first time considered themselves primarily as consumers.

    And the banks and corporations took advantage. They were the prime benificiaries, but not the prime cause.

    Where I disagree with you is in the idea that the stables can be cleaned up. Conditions now bear no comparison to 1945.

    My historical analogy is that the capitalist west is now in the same posiiton that the mighty Spanish empire was in the 17th century: hegemony is passing, never to be retrieved.

    The future is BRIC.

  2. Colin.

    You’ve left me behind in your logic, as you do so many times.

    Or is it that once again you’ve been deciding what you think I think instead of reading what I actually think? Because I can think of no other explanation for you thinking that I think that the post-war period was some model of perfection. Or that “what you seem to be asking is for people to spend three decades lifting themselves from their desperate social & economic postwar plight -and then call a halt to technical progress & continued expectation of improved living standards & say-right, this’ll do thanks.”

    This latter one in particular is a rather silly idea and absolutely not one that I share. I’m all for improvements in living standards and technical progress.

    1) The living standards of ordinary people improved significantly more in the period 45-70odd that they have done since then. [1]

    2) Is technical progress the preserve of a rampant free-market approach and throttled by a Big Govt approach?

    Given that many of the key features of late 20th/early 21st century technology are the product of Big Govt, I think you’re on dodgy ground here. Jet airliners, space flight, computers, GPS, nuclear power, the Internet, high speed train systems etc. And pretty much every one of those had its origins in the three decades following WWII.

    By the way, you really should do your homework on economic performance, instead of trotting out the usual banalities about the 1970s. Between 1950 and 1979 (I don’t have the data before 1950), our average annual real GDP growth was 2.1%. Between1979 and 2008 it was 2.1%. Averaging out the blips of the Barber Boom and the IMF-imposed austerity, we spent the 1970s growing at, yep, 2.1%.

    So, the horror decade saw us chugging along at the same real growth rate that we have done for the entire post-war period. But because the 70s were so inimitably awful, we had to let the free-market genie out the bottle to save us.

    And what happened? Growth carried on at the same rate it had done before. The proceeds of that growth went disproportionately to the top end. That same top end took the insane risks that blew up in 07/08.

    And we’re then supposed to believe that the problem is with a feckless proletariat that prefers X-Factor dreams to hard work? I suggest that they are a symptom of the problem, not the cause.

  3. There are a lot of one-sided posts regarding the current situation being the result of unbridled capitalism.

    Let’s not forget that the late 1970s had inflation over 25%, grossly inefficient nationalised industries including coal, electricity, gas, telecomms, steel and cars (most of whom seemed to be on strike most of the time), 33% BASIC rate income tax, 102% tax on so-called unearned income etc etc.
    This led to an understandable swing back towards capitalism.

    The swing may have gone too far, but now, when even the Labour party is suggesting tightening up on state benefits perhaps we are reaching some sort of consensus whereby we can all pull together to get out of the current situation.

    As for people getting into debt, what has happened to individual responsibility? In the late 1970s I received offers of loans in one week which totalled over £50,000 at a time when I had just bought a big 3-bedroomed semi for £11,000 (and over 50% of my net income was going on the mortgage). I was tempted to accept them all and skip the country, but chose not to. More recently my daughter bought a house about 10 years ago. She was 19 at the time, had minimal financial help from us, and had a fairly low-paid job. She has now bought another and is renting the original one out to pay the mortgage. Apart from the mortgage she has never been in debt, and neither have my other children.

    Getting into debt is a matter of individual choice and cannot be blamed on anyone else.

  4. Steve C

    I agree pretty much 100% with your analysis.

    A couple of observations.

    1) Yes, certainly the conditions now are nothing like 1945. Which is why I despair of us finding our way out of the current malaise of our own accord. Things are not bad enough for us to discard a failed model. But (pace my reply to AiW earlier) God knows I don’t want a change so badly that I’d want us to go through the horrors of 1935 Wigan or what came shortly afterwards.

    2) I’m not in the slightest bit interested in hegemony. I’m relaxed about other countries overtaking us. It is inevitable that they will decline relatively, if for no other reason than demographics and the fact that our growth possibilities are limited by our economic maturity (i.e. poorer, more backward countries can have exceptional growth which more mature countries can only dream of). The question is whether we are doomed to an ABSOLUTE stagnation a la 18th century Spain. That is not pre-ordained. If a Lost Decade is looking more likely by the month, one hopes that future historians will not see the current period as the first 4 or 5 years of a Lost Century.

  5. @RiN
    “Hung parliaments are very rare in a fptp system, I really wouldn’t bet on another Hung parliament. The voters tried to get a Hung parliament in 92 but didn’t manage it and we ended up with major. I’m afraid that Hung parliaments are a once In a generation thing”

    Canada managed to get 4 hung parliaments in a row. And India isn’t particularly prone to one-party rule. Even here in the UK, we had five hung parliaments out of twenty six 20th Century elections (Jan 1910, .Dec 1910, 1923, 1929, Feb 1974).

    If the Lib Dem vote holds up in their existing seats, and/or the SNP perform very well in 2015, then there’s a lot more scope for a second hung parliament in a row. The most likely outcome for 2015 is a Labour majority, but a hung parliament can’t be ruled out.

  6. Pete B.

    I’m well aware of what rate inflation (briefly) touched in the 1970s. (It is, of course, conveniently forgotten that the corollary of that was that unemployment was very low, so the 33% was being paid by a lot of people in work – funny how we remember inflation but forget the horror that was felt at unemployment reaching the obscene level of 1 million, eh?)

    Anyway, of course the inflation level was unsustainable and it required nasty medicine to correct it. Perhaps the medicine wouldn’t have had to be quite so unpleasant had Barber not taken leave of his senses in 73, but that’s veering towards a partisan opinion, so I’ll withdraw it.

    The question is whether the response to that experience, a generation in which regulations and controls were ripped up and the markets set free, was a sensible response. Or whether, in the big scheme of things, we would have been better taking the medicine but not transplanting the heart.

  7. @Lefty

    Thanks for the constructive reply. And for info I was using “hegemony” in a purely non-judgmental way to describe recent history, not in normative sense (either perjorative or enthusiastic).

    I still fear absolute decline (we agree on the statistical inevitability of relative decline). I hope, for my grandchildrens’ sake, that I’m wrong.

  8. Lefty
    “…The question is whether the response to that experience, a generation in which regulations and controls were ripped up and the markets set free, was a sensible response.”

    I’ve heard this said a lot, but am unsure of exactly which significant regulations and controls were ripped up. Can you elaborate?

  9. @ Paul C

    Perhaps your BIG SOCIETY role is too big for you?
    You get what you pay for with volunteers. :-)

  10. OK, a couple of points on the seventies since it understandably crops up a lot….

    Was there high inflation in the seventies?

    Were there more wage demands than usual?
    Also, yes.

    The problem lies in the attribution of cause and effect. The cause was not government policy, nor union greediness, but was instead a massive hike in the price of oil following the Yom Kippur war in ’73.

    The resulting inflation started under Heath, and it continued under Thatcher and it wasn’t their fault either.

    Inflation as a result of the oil crisis peaked in ’75 at 25%, and had been high before that so it’s not really surprising there were strikes with wage packets taking such a hit.

    But the strikes were a response to inflation owing to the oil crisis, rather than a cause.

    If you doubt this, we were not the only nation to be hit by inflation due to oil, though the impact depended on an economy’s vulnerability to foreign oil and also domestic demand.

    So the US, with a lot of its own oil suffered rather less than say Italy, who from memory peaked at around 19% inflation.

    That said it is also true to say that wage rises in response to inflation do not help the problem, which us why Labour implemented a wage cap in its policy mix, and it worked. From a peak of 25% inflation in ’75, by ’78 inflation was down in single figures, and having inherited a rapidly rising deficit that was coming under control too.

    And Labour were also doing nicely in the polls. So why didn’t Labour cruise to victory? As their term drew to a close, there was another oil price spike. (It actually peaked early in Thatcher’s first term). Inflation shot up again, and with workers seeing their wages eroded even more the unions broke ranks with Labour.

    The result was the Winter of Discontent and the rest is history…

  11. Pete B.

    Well for starters, have a listen to Nigel Lawson between 07:00 and 09:00 in this BBC programme.

    It’s interesting to hear the claim in that programme that the success of the City following the Big Bang led directly to pressure for repeal of Glass-Steagel, which itself led straight to the 07/08 catastrophe.

    And of course, more parochially, the era that the Big Bang ushered in in the UK led to the good old Captain Mainwaing bank manger being swept away with banks falling over themselves to throw credit at anyone who would take it.

    Personally, I profited very nicely from this. In the mid 2000s, I re-mortgaged with Woolwich (once an old fashioned sensible building society – most of those vanished in the 90s as they dived into the trough and converted to become high rollers). They gave me a mortgage at 0.75% above BoE base AND a facility to withdraw capital against my house up to 80% of THE VALUE THAT I CLAIMED IT HAD.

    Utter madness. I was a bad credit risk, being a small business owner. They had no idea whether my valuation was justified. When I needed £40k to see my company over a brief cash hiatus, this was a dead easy source of capital. And absolutely NOT one that should be available without some degree of oversight.

    (Not that I was a risk of course. Being narcissistically special, I had weighted the risks and made the right call. But the thought of all those feckless people withdrawing capital with no questions asked to fund their party packs of oven chips and their George Foreman grills. Fair sends a shiver down me spine.)

  12. The thing about 33% income tax in the 70s is that vat was only 7.5%. I know this aint correct mathematics but 33+7.5=40.5 as opposed to 20+20=40. Thats a big difference

  13. RiN

    The difference is very much in the philosophy.

    Back then the approach was that the Collective (through the Govt) will take a lot of the big decisions and that will require me to give up a certain amount of my personal freedom of action. Over the last 30 years, the approach has towards one of allowing me (and 60 million less smart people) to make the decisions and allow the common good to emerge there-from.

    That, in a nutshell, is the economic history of the Western World over the last 70 years. If we could have a nice grown-up debate about the relative merits of the two approaches, without descending into “Yeah but one led to the 1970s so that was clearly wrong” childishness, then we might be on the road to getting somewhere.

  14. Lefty
    “But the thought of all those feckless people withdrawing capital with no questions asked to fund their party packs of oven chips and their George Foreman grills. Fair sends a shiver down me spine.”

    Caveat emptor? Shouldn’t people be allowed to make their own decisions for better or worse? People who buy oven chips and George Foreman grills are still people. Why should the government make their decisions for them?

  15. Lefty

    Pretty much what ive been arguing for ages, but the elite really have screwed it up this time cos folk like me have become aware that all this money that was lent out was created out of nothing. If only they had been able to restrain their greed most of us would have remained blissfully unaware of the pretend money scam. For me a return to the 60s with its controled credit market pushing (or at least trying to) banks to extend loans to business rather than real estate is not an option, yes it was better but better still would be to take the money supply power away from private indiviuals (or let us all conjure loans out of nothing) allow only real money loans that lenders either have to have as their own money or borrow from the public or the BoE. Of course the other monetary difference with the 60s is that then we had a gold standard of sorts, but now all money is backed by nothing but faith, im not sure what to do about that, really not sure that we want to tie money up to gold again but we might have no choice. Anyway as far as I can see the market can’t be trusted with the money supply especially if there are no consequences for getting it wrong

  16. Well someone has to interrupt the (deserved) paeans of praise[1] for Anthony’s piece with a bit of quibbling – even if he did include that wonderful xkcd cartoon about Magical Psephology from the US Elections[2].

    Anyway I think he underestimates some of the problems that the Conservatives face. Look at Lord Ashcroft’s ‘July’ figures (fieldwork late May, so still after the Budget) where the headline figures were Con 30%, Lab 41%, LD 10%, UKIP 8% – pretty near current YouGov figures [3]. The 16% of current Tory VI/5% of the electorate that Lord A calls ‘Joiners’ (did not vote Con in 2010 but would now) consists mainly of two groups. 55% of them did not vote at all in 2010 – would it be cynical to suggest that the same thing may happen again this time with many of them? Non-voters tend to stay that way and, because people vote against more strongly that for, if they couldn’t be bothered to oppose a Labour government last time, you wonder if they will turn out to support a Conservative one.

    The other big(ish) Joiner group are the 26% who voted Lib Dem in 2010. This LD to Con group has been fairly consistent at around 8% of the 2010 vote since we’ve had the YouGov analysis. They’re almost certainly tactical voters who will either go back to LD if they happen to be in a LD/Lab marginal or (more likely) voted LD in safe Labour seats as the way to keep Labour out. In either case those votes are no good to the Conservatives, no matter how they end up.

    So you can probably write most of the Joiners off. But the real problem is Lord A’s ‘Considerers’. There simply aren’t enough of them – only 3% of the electorate. With the 18% of ‘Loyalists’ and the en-masse return of the 9% ‘Defectors’ it is theoretically possible to squeeze an overall majority, but that low 3% means there’s nowhere to get the extra votes. The rest of the voters are simply anti-Tory.

    So of Anthony’s two “reservoirs of potential extra votes”, one is half-empty and in the wrong place and the other one is really small.

    Incidentally despite the belief that the Lib Dems have ‘lost their left-wing’ and therefore the remainder must be pro-Conservative, less than 10% of current Lib Dems would consider voting for them. Which makes sense as hard-core voters are hard-core. But it’s yet another group that won’t be coming to the aid of the Conservatives.

    Even more damagingly less than 3% of current UKIP voters[4] said they would consider voting Tory in future. Yep not 30%, 3%. Whether that anger will last is another matter, but it’s another barrier for Cameron to overcome.

    [1] Technically this is tautological, but I would argue that you can have paeans of blame for example if you’re really ecstatic about slagging someone off.

    [2] Though my favourite relevant one from the period is probably this classically simple one:

    [3] I’m using figures before turnout adjustment for true comparison – though in practice it doesn’t seem to make much difference.

    [4] As always it has to be pointed out that a majority of UKIP voters did not vote Conservative at the last election (only 43% did in this poll) so those hoping for a mass return home must remember that most weren’t from there in the first place.

  17. Pete B

    “Caveat emptor? Shouldn’t people be allowed to make their own decisions for better or worse? People who buy oven chips and George Foreman grills are still people. Why should the government make their decisions for them?”
    Is it not obvious?

    The induviduals’ decisions affect the collective. If several million people are financially prudent, they will still inherit Hell if another few million are financial free and easy.

    There are wonderful fairy stories on the theme that individuals can have freedom to do what THEY want and that only THEY will face the consequences of getting it wrong. These stories are comforting for bairns who want a simple world. But in the real one, what YOU do affects ME. So we need a grown up to make the least-bad decisions.

    In the case of the financial sector over the last generation, I’d have thought it was self-evident that THEIR freedoms (and the freedoms of other free actors to take on their products) have led us into a bit of a pickle.

    Maybe if we’d had a (fallible) Government taking away a little bit of that liberty of action, the outcome might have been a bit less bad.

  18. @Roger M

    Thanking AW for posting a really meaty thread doesn’t necessarily imply that you also agree with the thrust of the key arguments. At least, in my case I’ve got several bones of contention (posted much earlier) and yours are further grist to the mill.

    FWIW I’ve some sympathy with the argument that the Cons could gain disproportionately in Con-LD marginals from a LD collapse – but it needs to be put in perspective. The LDs are only starting on 57 so we might at most be looking at 5 more seats than might be picked up under UNS – hardly earth shattering. And I’m really struggling with the idea that Labour could pick up votes everywhere except the marginals where it really matters, both on theoretical grounds and empirical evidence from polls and actual elections so far. The incumbancy issue is far more convincing. So taken overall, the case that there might be some limited unwinding of the bias favouring Labour in the electoral system seems reasonable, but the scale suggested (a net unwinding of 7%) is not.

    The arguments as to whether the Conservatives could get back close to 37% let alone exceed it are of a different nature and I think will be coloured by each of our political perspectives. Personally I’m still expecting some poll movement in the next few months that makes their task harder. Large numbers of people on low incomes will shortly wake up to the impact of a whole raft of measures that will hit their pockets in the Spring, and the rest of us will start to reform our opinions when the once abstract changes into the reality of the impact on real life people whose plight is difficult not to empathise with.

    Incidentally, there’s just been some YouGov polling on the welfare changes. Still some superficial popularity, but the more people learn about the real impacts rather than the myths the Government is trying to peddle, the less they like them.

  19. lefty

    “led us into a bit of pickle”

    nice phrase.

  20. We are about to see the impact of the child benefit changes.

    To summarise these mean that those families with One or More Children with One earner earning between £50K and £60k will now be paying the highest marginal rate of tax in the country. Those with two or more earners earning less than £50K each will not be penalised.
    Those earning between £60K and £150k will also see their disposable incomes fall by in some cases more than 10%. Only when the “Millionaires” tax cut appears above this figure is the situation redressed.

    If the individuals concerned do not stop their child benefit payments now and most won’t, they will face a tax bill next January running often into Thousands with the obvious potential for serious financial difficulties.

    There are some 900,000 people adversely effected. Many are “natural” Tory Supporters.

    Labour will no doubt portray this as another unfair government tax on nearly a million “strivers” to provide tax cuts for 8,000 individuals earning over a Million a Year.

    The problem for the Conservatives in regards to damage limitation from the fallout caused is exacerbated because Labour’s allegations are in essence true.

    What impact this will have on VI remains to be seen but frankly I don’t see how the Tories can spin it to anything positive.

  21. @Christophermars – “Alec – I think you’re taking a rather speculative piece of work a bit too seriously. ”

    Don’t think so – this isn’t speculative work, and is backed up in it’s tone and findings by many other sources (try having a look at ‘Quiet: The Power of Introverts’ by Susan Cain).

    Some has definitively changed in the way we bring up young people to think about themselves. I suspect when this is added to relatively recent changes in economics, particularly around borrowing, credit and debt, I suspect that we have the origins of the complex mix of factors that has helped to created the biggest slump since 1929.

    Oddly enough, the 1920’s were also characterized by an exuberant optimism, a flowering of personal free expression and relative social liberation, and the availability of easy credit. The end result was the same.


    Dead right. The UK’s record on tax havens, under Thatcher, Major, Blair and Brown, has been absolutely shocking. We are directly responsible for a very large share of the global tax evasion industry, and need to show leadership.


    Thanks- I tend to suspicion about talk of new paradigms-mainly because I don’t like the word much.

    ……….but I know what you mean……….and some things will change fundamentally.

    Lets hope for the good?


    You don’t surprise me- I always have the impression that you are a completely self-effacing recluse.

    @”Because I can think of no other explanation for you thinking that I think that the post-war period was some model of perfection.”

    Because you wrote :-
    ” have a strong sense that when the History of the Developed World’s 20th Century is written (at a sufficient remove for it truly to be history rather than current or recent affairs), the period from 45-70summat will be seen as the one in which we got the fundamentals deeply right.”

    You are welcome to your view of the 70s.

    I will stick with mine thanks.

  25. STEVE

    @”Labour will no doubt portray this as another unfair government tax on nearly a million “strivers””

    They will.

    But what will the response be of the 85% whose child benefit is not means tested because they earn less -a lot less- than £50k or £60k pa ?

    Will they think it unfair?

  26. STEVE
    @”Labour will no doubt portray this as another unfair government tax on nearly a million “strivers””
    They will.
    But what will the response be of the 85% whose child benefit is not means tested because they earn less -a lot less- than £50k or £60k pa ?
    Will they think it unfair?

    -With FPTP where it is only a few votes in a few constituencies that may swing it it isn’t particularly relevant .It is with those voters who might otherwise have voted Tory or LD and now won’t that the next GE will probably be lost or won.

    However, most families with 2 earners on for example £30k each can see the obvious unfairness of the situation of another family on £60K incidentally paying more tax already on a single income not receiving the same benefit they are.

    The point remains both groups will perceive effectively giving this money in tax cuts to those who manifestly don’t need it as being perverse.

    Let’s see how it plays out.

  27. The point about the chid benefit, in terms of its effect, is that is another daft idea made worse by tinkering with it in the face or opposition. It will anger many natural tory supporters and the anomalies will be big news and poor publicity.

    It doesn’t sit well with the stated aim of “simplifying” benefits etc.

    I think it will be another own goal.

    If people are considered to be too well-off then use the tax system – its a lot more straightforward.

  28. Alec et al–Howe_generational_theory
    I don’t completely agree with this theory – it’s far too neat and probably falls in to the realms of finding patterns where there are none.. but you all seem to be blaming individualism and calling on a need for community purpose. Err.. exactly as the theory predicts.
    See also: Big Society and One Nation.

    This deeply worries me, as a libertarian – because last time, some of those ‘strong institutional orders’, following a crisis, led to some pretty horrific politics.

    Not that these sorts of ‘World History’ theories are new (although the generational theory looks only at a small ‘wave’) – see also Spengler, Toynbee, etc but it’s just interesting that the internal narrative expressed here matches the forecast narratives.

  29. Just as a caveat to my last an example of one of these “high earners” who will lose out in favour of those earning £3K per week+, would be a Senior NHS Clinical nurse in London with 4 Children who earns around £61K a year and will see a loss of over 10% of their after tax income.

    This isn’t an imaginary creature as I am married to One!

  30. I read the article by John Lancaster with interest as I have done some of the posts above. I found the article disappointing. Whilst I would agree that the Governments plan is not working as hoped the article does not seem to offer a solution other than talking about the “multiplier” and Keynes, which I presume means he favours greater borrowing and spending to promote growth as a way out of our difficulties. The reason I support the Governments management of the Economy rather than the “borrow more” approach is that at least it is an attempt to do the right thing. The greater borrowing and spending approach would fail, sunk by the market’s reaction and the rapidly increasing cost of borrowing.
    As we live in a democracy, there probably is no real answer, as root and branch reform of the state which I believe is required, is probably electorally impossible. It therefore does not really matter who wins the next election, the decline of this country will continue. Who you think will hasten that decline depends on your political outlook. To me much of Western Civilisation shows that a process of terminal decline is well under way. I think it started in the late 40,s with the growth of the welfare state throughout Europe, and accelerated with sixties sexual revolution and the decline of spirituality, marriage and the family. The 70’s were truly awful and whilst the 80’s gave me great hope these hopes were dashed by the 90’s and the last decade. As posted above “decadence” is a word which comes to mind and I like the parallels drawn by other posters, of the decline of the Roman and Spanish Empires. Having said that I do not believe that Capitalism is dead, far from it, to me it is alive and well. It seems to me the one economic system that reflects human nature and the desire to do the best for oneself and one’s family. As Steve Coberman says the future lies with the BRIC countries. Of course they in their turn will go into decline as they make the same mistakes that we in the West have.
    Not a cheery view, but I have reached the age and have enough wealth that I can choose to live in my own cocoon and ignore the rest of the World, most of the time. As for my children I have advised them to work hard and go to “where the action is” so they can make a pleasant life for themselves. I suspect my children will not follow that advice, but my grandchildren will.

  31. TOH

    If you think the rot set in in the 40s, may I politely suggest that you do what I have just done and read The Road to Wigan Pier? It might remind you that there were one or two minor problems before the socialists ruined everything with their damned Welfare State.

  32. STEVE

    @”However, most families with 2 earners on for example £30k each can see the obvious unfairness of the situation of another family on £60K incidentally paying more tax already on a single income not receiving the same benefit they are.”

    If you plug your family of 2 earners @ £30k each ( + say two children under 13) into IFS’ Income Distribution thingy-it tells me:-

    ” you have a higher income than around 87% of the population ”

    Most families sit FAR to the left of” your ” chosen family on IFS’ income distribution bell curve.

  33. Roger M – good post.

    Just one slight quibble re UKIP-Cons.

    IIRC Ashcroft polls and others have shown that most (around 75% I think) of new UKIP supporters voted Cons at the 2010 GE.

    In this context I think it is fair to postulate that a UKIP decline from say 10% VI to 4% at the GE would be worth net around 4% for the Conservatives over Labour.

    For me the ‘real’ Tory VI is 35%+ already due to this and a good wedge of returning DKs on YG at least.

    As per Alex (and others) I think the real UKIP impact is the possible tacking to the right by the cons in order to get the max UKIP ex Cons back which could impact attracting new voters and/or retaining more centrists Tory 2010 voters.

  34. Certainly the attempt ( fair & reasonable imo) to remove child benefit from higher earners looks administratively fraught.

    Similarly, EB’s proposal to remove higher rate pension contribution tax relief to pay for “guranteed jobs” has prompted criticism from IFS.
    They say large marginal rate cliffs will be generated & ” “create complexities and an awful lot of tax planning”.

    Both of these examples show how tangled a web , Welfare Benefit can become over time, and how difficult it is to untangle it, when economic or social conditions change and/or norms of “fairness” require adjustment to be made.

  35. STEVE
    @”However, most families with 2 earners on for example £30k each can see the obvious unfairness of the situation of another family on £60K incidentally paying more tax already on a single income not receiving the same benefit they are.”
    If you plug your family of 2 earners @ £30k each ( + say two children under 13) into IFS’ Income Distribution thingy-it tells me:-
    ” you have a higher income than around 87% of the population ”
    Most families sit FAR to the left of” your ” chosen family on IFS’ income distribution bell curve.

    Your point is what ?

    Whether there is any justification in taking away this particular universal benefit at a time when we want individuals with residual income out there buying in the UK and investing in the UK is frankly very dubious.

    Of course it won’t make these people poor ( I include my own family ) but it does mean we have £3000 less per year to spend supporting the economy.

    If in addition to this the money realised from this saving (if any) isn’t given to those poorer , which personally I would have no big problem with as giving money to those on the lowest income pretty much ensures it is spent in the economy,.

    But instead it is being given or perceived to be given as a tax cut to those in the top 1% of the income curve who have a predilection for off shoring their wealth and spending outside of the UK .

    Again I can’t see how this can be spun as anything other than a tax increase on middle income earners accompanied by benefits cuts for poorer earners and tax cuts for the very wealthiest.

    It will not do anything to encourage the return of voters to the Tory camp.

    I am quite happy to listen to an argument about how this will be portrayed any other way.

  36. Colin

    Did you bother to get to the end if that paragraph. Because if you did, I’m struggling to understand why you think I believe the 45-75 period was done model of perfection.

    I’ll spell it out for you, although I suspect I am wasting my time as you clearly know what I think without reading my actual words: my belief is that the era of controlled capitalism was the least bad era of overall performance for the Western world in the 20th century. The dominance of the free market either side of that led to obscene excesses and wildly unstable economic performance. 45-75 was FAR from perfect, but on balance it was less bad than the alternatives.

    You probably disagree. I respect that disagreement but would appreciate it if, when replying to me, you base your reply on what I have said. It’s a much underused tactic in grown-up discussion.

  37. I can’t understand why tax relief on pension contributions is not limited to the basic rate of tax. It will still be worth doing for everybody, but the high earners will get less relief.

    The child benefit being taken away from higher rate tax payers is foolish because it id a benefit aimed at children and stops when they are no longer children anyway. The adminsitrative costs and muddle caused by looking at single incomes instead of household when you do the opposite for other benefits strikes me as mad.

    But because GO announced it he can’t now abandon it.


  38. STEVE

    @”Your point is what ?

    ermm-I suppose it is:-

    If Child Benefit has to be restricted as part of Welfare Benefit reform & cost control, then to limit that restriction to the top 13% of the family income distribution is a reasonable attempt at fairness.

  39. STEVE
    @”Your point is what ?
    ermm-I suppose it is:-
    If Child Benefit has to be restricted as part of Welfare Benefit reform & cost control, then to limit that restriction to the top 13% of the family income distribution is a reasonable attempt at fairness.

    But of course that isn’t happening because of Osborne’s insistence on basing the figure on a single income ,as those with 2 incomes under £50K amounting to more than £60K in total are manifestly better off than a family with One income of £60K and for those fortunate enough to earn in excess of £150K the loss is offset by a tax cut.

    NICKP is correct in his analysis
    Incidentally only 200,000 have opted out of the system which the Tories are suggesting is positive

    .It actually means over 700,000 will now be in receipt of income that requires to be paid back through additional tax.

  40. LEFTY

    If I paraphrased you & misinterpreted a nuanced opinion , then I apologise.

    Tempted as I am to go dig through the histories of the post-war years I am currently wading through, in order to attempt a fact based exchange with you, I will give it a miss.

    l am sure that your views & opinions are sincerely held .
    But philosophically we would be so far apart that it would be a fruitless conversation.

    I can agree with you that the end of the “post war consensus” & it’s cosy Little England economy -and the process of joining the global competition for competitive advantage & trade has led to “obscene excesses” which have damaged individuals & communities worldwide.
    But I could suggest no less obscene excesses to you from the era that you value so much.

    Finally-I have some agreement with you about wishing for a grown up debate on the appropriate & sensible balance between individual freedom & state control.

  41. @ Roger Mexico

    “Incidentally despite the belief that the Lib Dems have ‘lost their left-wing’ and therefore the remainder must be pro-Conservative, less than 10% of current Lib Dems would consider voting for them. Which makes sense as hard-core voters are hard-core. But it’s yet another group that won’t be coming to the aid of the Conservatives.”

    Your comments ring so true for me here.

    Although I have been bridling at Lefty Lampton driving a coach and horses through notions of personal freedom in favour of a big stick state wielding socialist solution (one where we have to “trust a grown up” cut the cake up fairly it seems) ChrisLanes constant assumption all remaining LDs are going to run off with the Tories in 2015 has me fairly scratching my eyeballs out every time I have to read it.

    Nothing could be further from the truth of course because for mine it should be perfectly reasonable to be in favour of personal freedom and not in anyway overly left or right wing. And because I view current Con policy to be as hostile to this notion as current Lab one is I will remain a non-voter for either thank you very much.

    Indeed I would argue that it is because we have allowed “the grown ups” too much authority over us these past 3 decades that has allowed many of the problems that have been alluded to in this thread. Surprise, surprise that the powers that be (whoever they were) contrived solutions that suited themselves very nicely and to the detriment to the rest of us.

    Personal freedom is the antidote to that and not the cause. At least in my world view.

  42. Colin

    Call me a mono-maniac, but I have an obsession with fact-based arguments (as opposed to opinion based ones: as a wise man once said, opinions are like rear-ends – we all have our own one that we hold dear and most of them are full of excrement.)

    The graph on real GDP that I posted last night ought to be (in my opinion) the agreed foundation of any discussion of the merits of different post-War economic models. What it shows, beyond argument, is that there was no major quantitative difference between our economic performance in the pre 70s and post 70s periods. Or in the 70s come to that. That is unarguable. So the idea that we threw off the shackles and allowed a previously restrained economy flourish after the 70s is patently untrue.

    THEN, we can get to opinions. If there is no basic difference in overall performance, it comes down to a matter of preference. Do you prefer freedom of action, with the consequent economic instability, structural unemployment and relatively inequitable spread of rewards? Or a firm hand on the tiller, with the wilder fluctuations restrained and a broader sharing of the economy’s products but with the consequent loss of individual and business freedom and a threat of high inflation if the politicians get the calls wrong?

    Set the argument up in those terms and we are much more likely to have an adult debate, rather than the “yah-boo, your preferred system was crap because it led to X” one that usually occurs.

  43. @ Lefty Lampton

    “Or a firm hand on the tiller, with the wilder fluctuations restrained and a broader sharing of the economy’s products but with the consequent loss of individual and business freedom and a threat of high inflation if the politicians get the calls wrong?”

    See I think since the 70s we got the business freedom but not that much real individual freedom. The right wing philosophy that you are obviously hostile too was in my opinion (probably just excrement but sincerely held) just as flawed as the one you are advocating.

    And both are relying on politicians making the “right call” far too much for my liking.

    Ironically where you and Colin probably find the most agreement is that politicians can make the right call. Your disagreement is in just what that is.

  44. To repeat myself, its irrelevant whether one agrees or disagrees with the principle of reducing child benefit. Its the fact that it wil be a fiasco and all “cut-off points” create ludicrous and unfair anomalies anyway

    That is what the public will get through the media and nothing else matters – in political terms anyway.

  45. A good analysis.
    One question I would ask though is this.. With the falling Con Vote and the rising UKIP vote wouldnot more disgruntled LibDems not now vote for Labour rather than vote tactically as in the past in Con Constituencies?

  46. 100% Agree with Paul.

    However ,seeing £3000 disappear from your anticipated yearly income on the basis of Osborneomics doesn’t exactly leave a warm and fluffy feeling either.

  47. Nickp

    I cant understand why there is tax relief on pensions at all, it just another subsidy. However balls announcement on restricting tax relief to basic rate has got parts of the press frothing at the mouth and drawing comparisons with browns pension “raid”, I wonder if this will have any effect on polling, in particular balls personal rating. Being negatively compared to brown might not be good for him

  48. Leftylampton

    Re your choices, I would choose freedon every time.

    I have lived throughout the period from the early forties onward. My memories of the period 45-75 are of initial austerity followed by poor government by both parties and a sharp decline in morality. It was also a period of much dreadful British management and overbearing Unions.

  49. TOH

    Moraiity is subjective: homosexuals were prosecuted not so long ago – was that moral, to give one example?

    There is cleary no OBjective answer

  50. Leftylampton

    I should also remind you that during most of that period Britain was the laughing stock of the World, economically and they talked about “The British Disease”.

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