On 16 September 1992, Britain crashed out of Europe’s Exchange Rate Mechanism. The day quickly became known as ‘Black Wednesday’, as it signalled the end of the Conservative Party’s reputation for economic competence. Will Alistair Darling’s Budget last week inflict the same terminal damage on Labour?
YouGov’s two post-Budget polls, for the Daily Telegraph and Sunday People, find that the Conservative lead has jumped from seven points immediately after the successful G20 meeting on 2 April, to 18 points now. For more than six months, from late September last year to early April, each YouGov survey showed the Tories modestly ahead – enough to be the largest party in the House of Commons, but not enough for them to be confident of a working majority. Our two post-Budget polls restore the Tories to landslide-victory territory. Reflected in a general election, these figures would leave Labour with fewer than 200 seats – their worst performance since 1935.
So: will these poll ratings prove to be a short-lived blip; or has Labour’s reputation now been scarred beyond recovery? The message from the Telegraph and People contains two glimmers of hope for Labour. The first is that most of the specific proposals in the Budget are popular. Around 60% of voters back the decisions to tax top-earners more heavily and to withdraw their tax allowances and curb their pension tax relief. There is also support for increasing duties on alcohol and tobacco, though not on petrol.
The second crumb of comfort concerns the reason why the Tory lead has jumped. It is that most people simply don’t belief the Government’s forecasts for the economy and borrowing. Only nine per cent think Britain’s economy will start growing again this year, and 65% think the Chancellor has understated the true level of government borrowing over the next few years.
In short, the public thinks the Government has screwed up on the economy. So why do I regard these findings as a crumb of comfort for Labour? Here’s why. We shall know in the run-up to next year’s election whether the Chancellor is right or wrong. If the economy does start to recover, and if, as a result, the borrowing figures remain in line with last week’s forecast, then ministers will be able to say ‘told you so’, or words to that effect, and attack the opposition parties for their excessive gloom.
We have been here before. In 1998 Francis Maude, then Shadow Chancellor, attacked Gordon Brown’s predictions for continuing economic growth and accused him of presiding over ‘a recession made in Downing Street’. When Brown was proved right, and growth did indeed continue, then Maude was left stranded, and was subsequently demoted.
Ministers must hope that something similar happens this time. The recession can’t, of course, be prevented. It is already deep. But a rebound later this year gives Brown and Darling the chance to reclaim their reputation for steering Britain’s economy through choppy waters to calmer seas ahead.
In 1992 John Major and his Chancellor, Norman Lamont, had no such prospect. They had made British membership of the ERM the centrepiece of their economic strategy. In the run-up to Black Wednesday they repeatedly denied that they would devalue the pound. When they did just that, their position was irrecoverable, for they could not erase the memory of their shattered promise. Today Labour has a chance, albeit only a slim one, of redemption; sixteen years ago, the Conservatives had none.
However, if Darling and Brown have got it wrong, and economic recovery does not resume later this year, then Labour’s electoral prospects will be dire. Last week’s Budget will then amount to Labour’s Black Wednesday.
Ministers must be praying for a sharp pick-up in economic activity. That will depend on consumer and business confidence, and the state of the housing market. For these to recover, bank lending will have to increase sharply. However much Labour rails against the banking community, its bonuses and its past follies, the party now needs that community more than ever, to provide the cash to kick start our battered economy.
Our poll for the Sunday People also tested whether the car scrappage scheme, and the extension of the stamp duty holiday on homes worth less than £175,000, would affect people’s plans. Converting our percentage results to the population as a whole, we found that three million motorists say they are “likely” to trade in their old bangers, while two million people say they are “more likely” to move home.
As with all such questions, expressions of interests will far outrun the actual number of people who follow through. If half a million more people buy a new car, and a similar number move home who would otherwise not have done so, then the schemes will have proved their worth. Our figures should be regarded as encouraging expressions of interest, not as firm commitments to boost the turnover of car dealers or estate agents.
