All three political parties recognise that the coalition’s success or failure will be defined by economic performance. Older Conservatives will remember the near-monopoly their party enjoyed over economic competence from the early 1980s until Black Wednesday. They only regained a consistent lead over Labour on this measure in the wake of the global financial crisis – both Norman Lamont and Ken Clarke registered lower popularity scores as chancellor than anything Alistair Darling had to contend with.
For George Osborne, the challenge is to bring a return to economic growth and show that the austerity measures will have a meaningful impact on the deficit – that the pain has all been worth it.
The public, so far, are sceptical. Latest ITV News Cuts Index figures show that over half of all adults think the public spending cuts are not being executed in a fair way, and that the government is cutting spending “too much and too quickly”. Moreover, the proportion that thinks Britain is on course for another wave of recession is double the proportion that does not.
There is also something happening with the way the public reports its experiences of public services locally. At first sight, it is quite alarming. Few actual cuts have been implemented, and while 55 per cent of people say there have been no change in services, some 40 per cent say that “local authority services such as libraries and waste collection” have got worse over the past three months.
It’s too early to tell with any certainty, but with expectations of the spending cuts being so profoundly negative, it is just possible that the reality may not be as bad as people currently fear. It’s like going to the dentist and being told: “This may hurt.” Yes, it might well do, but not as much as you thought. Time will tell.
The Labour Party needs to prevent voters from blaming it for getting us into this mess in the first place. Perhaps the public will always blame whoever is in power for bad economic news, in which case the coalition’s fate rests in the hands of the Office for National Statistics. If growth returns reasonably soon, the medicine has worked. At the moment, voters are complaining at what has been announced without yet feeling the pain. But if growth is slow in coming, then with higher interest rates, inflationary pressures, tax increases and tighter public spending, the public are not going to be in a forgiving mood.
What of the expectations of the parties themselves? We regularly take the economic temperature within Parliament, asking MPs and peers whether they expect a range of indicators to improve, stay the same or get worse over the next 12 months.
In tracking parliamentary opinion we can see the difference an election makes, and how MPs from different parties suddenly change their economic expectations depending on whether or not their party is in power.
The first table (see graph A) – never previously published – shows the proportion of MPs that expects each indicator to improve over the next 12 months, minus the proportion expecting it to get worse.
Surprisingly, the least pessimistic time was November 2009 when almost two-thirds of MPs expected an improvement in economic growth before the end of 2010. The polls were pointing, if not to an outright Conservative victory, at least to a Labour defeat – this was, after all, shortly after Labour’s disastrous European election results when Gordon Brown had registered the worst ratings of any Labour leader.
Yet Conservative MPs, who must have realised that a change of government was on the cards, were far less optimistic than their Labour counterparts. Did they, perhaps, fear the prospect of victory as much as relish it?
Once the coalition was in power, net Conservative optimism shot up from 12 per cent pre-election to the mid-50s, from where it increased further over the course of 2010. Conservative sentiment has steadily improved as this Parliament beds down. By contrast, Labour MPs have grown increasingly pessimistic.
It’s a rough and ready measure of sentiment, but if we simply add up the net scores for all four indicators registered in each wave, the ‘total pessimism’ or ‘optimism’ results can be seen in graph B.
What does this tell us of the mood within Parliament? Firstly, it remains worse than it was at the end of 2009 but better than it was in summer 2010, when sentiment across the House was incredibly negative. Secondly, it illustrates dramatically the principle that MPs of the party in government are always likely to be more optimistic than opposition MPs.
Which of the two largest parties is most in tune with public opinion? Neither. The public is not as optimistic as Conservative MPs, 74 per cent of whom in November 2010 expected economic growth to improve “in the next 12 months”. But nor are they as pessimistic as Labour MPs, 68 per cent of whom expect growth to get worse over the same period.
Significantly – especially given the absence of the constituency link – it is Members of the House of Lords who are closest to public sentiment. In the most recent survey of peers, we found 45 per cent expected economic growth to improve, 21 per cent to stay the same, and 27 per cent to get worse.
This is within about 10 per cent of the findings of the Ipsos MORI Economic Optimism Index, a survey of the public over the same period.
It is hard to remember a time when the economy was so important to an incumbent government. If elections are a judgment of economic competence, George Osborne has a further four years to save his party.
Andrew Hawkins is chairman of ComRes