It’s more than the economy, stupid

On the same day that the Prime Minister and Chancellor were issued with Fixed Penalty Notices, the Office for National Statistics announced a 7% year-on-year increase in inflation with sharper rises expected in the autumn. This came a few weeks after the Spring Statement and the prediction by the Office for Budget Responsibility of the sharpest drop in real household disposable income in any tax year since records began in 1956.

In Ipsos’ Issues Index — a barometer of public concern — in March, the economy and inflation/prices came second and third only to the war in Ukraine. In the middle of April more people were following stories about the rising cost of living than ‘partygate’. It seems apt to (mis)quote the most famous component of James Carville’s strategy for Bill Clinton’s 1992 presidential campaign, displayed on a sign in campaign headquarters — “it’s the economy, stupid”.

So-called economic determinism and the notion that high levels of economic optimism play an important role in governments being re-elected, waned sharply during the 1990s. The r² (R-squared) correlation quantifying the strength of the relationship between economic optimism (as measured by Ipsos’ Economic Optimism Index) and vote share was 90% in 1987 when Thatcher won a third term — an almost linear relationship. By contrast, it was a weakly 6% in 1992 and it was even lower, at 2%, when Blair took power in 1997.

The public’s generally positive view of the economy at the end of the Major government’s tenure did not avert a landslide, and Labour went on to win comfortably two more times despite the backdrop of negative EOIs. Prime Minister Brown was defeated in 2010 despite a positive EOI immediately before the election. His policies for dealing with the public spending crisis were more popular than the Conservatives’, but he could not garner the votes needed to stay in power.

The R-squared relationship has strengthened during the years of Boris Johnson’s premiership, as the pandemic and the cost-of-living crisis has pushed the economy up the public’s list of concerns. In the period since the 2019 general election, the correlation has been 11% but this remains much weaker than the equivalent 43% correlation between the Conservatives’ vote share and sentiment about the country’s direction of travel — a wider view of the ‘state of the nation’ (the question asks whether the country is on the right track or the wrong track).

The correlation could change with the economy and it seems churlish to suggest that economic fortunes and policies don’t matter, particularly if voters perceive difference between parties and candidates. And the way economic events are managed can create lasting impressions.

Before the 2010 election, the public weren’t enamoured by the policy of “propping up” the banks as a way of addressing the financial crisis, even if this averted further economic pain. Nor had they been impressed by the Major Government’s performance during Black Wednesday and the fortune made by George Soros and other speculators.

The sharp reversal in the fortunes of Rishi Sunak — from furlough ‘hero’ to ‘zero’, reflect style as well as the substance of management of the economy. Having said that the pandemic was “not the time for ideology and orthodoxy”, he has been called to task by popular Martin Lewis who advised him to “suck in his ideology” and address rising prices and indebtedness.

According to Ipsos, the public thought the Spring Statement would be a good thing for people on high incomes and big businesses, but a bad thing for people on low incomes, pensioners, young people, northern regions / small business owners and people on middle incomes.

The optics have been bad too — the kerfuffle about Sunak filling up someone else’s car at Sainsbury’s, his Easter break in California and the tax affairs of his wife — and Labour now lead the Conservatives in the public’s eyes at being better able to address rising prices. It probably didn’t take a genius at Labour HQ to come up with the party’s local election slogan; “on your side”.

The performance of the economy doesn’t determine voting intention as much as it once did but its management can feed and reinforce perceptions which can harm re-election prospects even if things are improving. We are in a ‘Maslow moment’ and staying in touch with public sentiment will be vitally important for the Conservatives.

Yes, these may turn out to be mid-term blues and Starmer and Labour have yet to cut-through and convince voters, but as well as the prospect of further economic pain, the other two phrases on James Carville’s sign ought to send additional shivers down Conservatives’ spines:

‘Don’t forget health care’.

Change vs more of the same’.

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