There are two ways to view Britain’s economy, and the next election could turn on which is uppermost in voters’ minds.
Here is the story that the Conservatives would like to take hold. After three years sorting out the mess that Labour left behind, the economy is starting to come right. Growth has resumed. More jobs are being created. The gloom of the past five years is beginning to lift.
Last month YouGov joined forces with CEBR, the Centre for Economic and Business Research, to publish a monthly Consumer Confidence Index. Drawing on four years of YouGov data, this shows that people are more optimistic than at any time since David Cameron became Prime Minister.
Later YouGov data for The Times, gathered after the announcement of 0.6% economic growth in the second quarter of this year, suggests that the growth in confidence is accelerating, especially with regard to house prices. Of course, a jump in house prices is double-edged. It hurts first-time buyers while bringing joy to existing home owners. But not only is the number of home-owners far larger; their optimism aids the recovery by giving them the confidence to spend more, either by running down their savings or by adding to their mortgage.
Our latest poll, for the Sunday Times, supports this happy narrative. We repeated a question we asked in April:
|Thinking about the current state of the economy, which of the following best reflects your view?||April 23-24 %||Aug 8-9 %|
The economy is still getting worse
The economy has stopped getting worse, but there are no signs of any recovery yet
Total no recovery
The economy is in a bad way, but is starting to show signs of recovery
The economy is improving and on the way to full recovery
True, most people think the economy is still mired in recession, but since the spring the numbers thinking that recovery is under way have more than doubled. If – and it certainly a big ‘if’ – the Office of National Statistics continues to report steady growth over the next 18 months, then more and more voters are likely to believe that the worst is over. The Tories will be able to fight the election saying that their tough decisions have started to pay off.
Labour’s narrative is very different. It starts with some solid statistics about the course of the recession: that recovery started in 2009 and was well under way in the spring of 2010 – only to shudder to a halt when the coalition came to office. Since then we have seen almost three years of flatlining and a succession of mixed government targets – badly undershooting on growth and overshooting on government borrowing. Even now it is touch-and-go whether Britain’s economy at the time of the next election will be back to the size it was in 2007, before the recession struck.
That is not all. Labour will argue that, even if gross domestic product is growing, living standards are not. It takes issue with George Osborne’s recent statement that ‘disposable incomes grew by 1.4% above inflation last year’. This is true at an aggregate level, because Britain’s population is growing. However, it is not true for most workers, whether in the private or public sector, because their pay is failing to keep pace with inflation.
But do perceptions match the statistics? Earlier this month the Labour Party asked YouGov to find out. We told respondents that official data showed that the economy was growing and asked people whether they thought ‘this improvement has or has not been benefitting people on middle and lower incomes’. Only 10% thought it has; 70% thought it had not. Even among Tory voters, who might be expected to have a more positive view of the impact of government policies, only 26% thought middle- and lower-income families had benefitted.
|Then we asked: From what you have experienced yourself, and what you have read or heard, would you say that household incomes have grown faster than prices over the last year or have prices grown faster than household incomes?|
Just 3% thought household income had grown faster than prices, and 7% said both had grown equally. A huge majority, 81%, felt that prices had grown faster than household incomes. Pay freezes and the nature of many new jobs, often low-paid and part-time (a tendency reinforced by the spread of zero-hours contracts), mean that millions of people still struggle to make ends meet.
Overall, then, British voters think increasingly that the economy is on the up but living standards are not. Thus is set the scene for the central contest at the next election. Which narrative will prevail: national cheer or personal pain? Who will we find more credible: the Tory minister, Peregrine Pangloss, or his Labour shadow, Carly Cassandra?
Were Britain to dive back into recession or, conversely, pay rates to accelerate past inflation, then the question would be easy to answer. At the moment, neither seems likely. The current pattern looks set. The next two years are likely to see slow but steady growth and minimal pay rises. The argument between the Conservative and Labour views of the state of the nation will remain finely balanced.
If economic statistics don’t settle the matter, politics might. What could shift public sentiment would be for one of the parties to rid itself of its most damaging negative.
The big Tory negative is that it is widely thought to be led by out-of-touch toffs who don’t understand the daily lives of ordinary folk. If people think that the their own take-home pay and public services will continue to suffer while fruits of economic growth all go to the well-off mates of the Prime Minister and their like, then further increases in GDP may not help the Conservatives.
Labour’s big negative is that it is still blamed more than the Tories for Britain’s problems. Its record – or, to be precise, public perceptions of its record – continues to blight its prospects. It strikes a chord when it says that living standards are still falling, but that is only half the battle. To win the next election, Ed Miliband and Ed Balls must show that they will do better than David Cameron and George Osborne.
Can Cameron convince people whose incomes are failing to keep up with prices that the Tories are in touch with everyday life? Can Miliband persuade voters that Labour has learned from the recession and now knows how to generate greater prosperity and spread it more widely? They, and we, have less than two years to find out if either can turn a gloomy ‘no’ into a happier ‘yes’.