Incumbent prime ministers, seeking to maximise their re-election prospects, used to attempt gearing the electoral and economic cycles. The aim was simple: call the election when voters are feeling pretty good about the economy and their own household budgets.
If that couldn’t be achieved, because the economy was doing badly all round anyway, then engineer a little short-term optimism, via a quick tax cut here or a cut in interest rates there – always reversible after the election, of course.
Had it not been for the Fixed Term Parliament Act – an offspring of that hasty coalition deal – David Cameron would surely have been sorely tempted to make his re-election bid last summer. The ‘economic optimism’ index stood at +30%. It had been negative from the start of the Coalition right through to the spring of 2014.
But, instead his judgement day is predetermined. That enticing window of optimism is a distant memory. Today the index stands at just 5%, and is heading steadily downward, in all probability into negative territory in early 2015. It looks like, for him, the economic and political cycles are becoming de-coupled.
As a result, we are now into the business of controlling the narrative about the economy.
The state of the economy, at the time of next year’s election, is now largely predetermined. It will be growing, inflation will be very low, and unemployment will be falling. Subject to any major shock, that will be it as far as the economy goes. That matrix is pretty good. Downing Street occupants ought to be pretty relaxed. But they are not.
The narrative isn’t exactly fitting the data. As we can see, good vital statistics keep flowing, but economic confidence amongst voters is sagging.
Firstly, because the return of growth, and the steady falls in unemployment – which heralded the end of recession – did not translate through to improved living standards. Wages have been stagnant, and real household income has remained squeezed. Real wage growth has resumed, but more by falling inflation, driven down by the oil plunge, rather than any significant growth in wage settlements. And the ‘feel good’ from real income growth always had a considerable lag before voters feel its effects.
Secondly, the Coalition chose to prick the confidence bubble. First there was David Cameron’s ‘red lights all over the dashboard’ comment, and then there was George Osborne’s Autumn Statement, revealing both an upward trend in the deficit, against forecast, and a programme of continuing deep cuts in public spending.
Why go against all the convention, and start pouring cold water on an economic story that most prime ministers seeking re-election would have readily settled for? Because the narrative wasn’t right.
The polling on issue salience showed the economy slipping down the league table, to be replaced by immigration and the NHS. The dominance of immigration provided a big platform for UKIP, and the salience of the NHS opened up opportunities for Labour. The Coalition felt it was being obliged to fight the wrong battles.
Hence the Coalition’s somewhat schizophrenic messaging on the economy: on the one hand ‘we have a long term plan’, ‘we are fixing the roof’ and so forth; on the other the flashing red lights and the commitment to deep spending cuts through the next Parliament.
This is an attempt to control the narrative, and to set in the position where the belief is ‘we are far from out of the woods yet, and you can’t risk a change to Labour’. In other words, an attempt to fight the battle of choice.
But it’s far from clear that the strategy is working.
Voters understand the economy is growing. But they are also tiring of austerity. And believe that if things are as good as the government says, then surely the end of austerity must be in sight. Only, according to the government, it isn’t.
Voters, in their current generally sceptical mood, may not be swayed by opposition arguments about this, but they are by the evidence from the front line. The impact of A&E departments at bursting point and Chief Constables saying they doubt they can maintain adequate policing much longer, as well as local councils closing libraries and leisure facilities all help set voters’ views on austerity.
The Coalition’s big gamble in trying to push the economy back up the salience league table, in order to get the battle onto its chosen field, is that the mixed message ends up baffling voters.
The polling by ICM on the Autumn Statement will worry the Conservatives: 35% think the Chancellor took the right decisions, but 55% think he is cutting too far and endangering core public services.
Ed Miliband sees an opening here. Labour continues to lag the Conservatives on ‘the economy’ – in some polls, by a substantial margin. But Labour’s approach to the all-important narrative is to unpick ‘the economy’ and focus on its constituent parts. Again, polling shows why. The latest economic polling by ComRes shows the Conservatives leading Labour on ‘promoting economic growth’ by 32% to 22%. But Labour leads the Conservatives on ‘tacking the cost of living’ by 29% to 17%. Since the Autumn Statement, Labour has also neutralised the Conservative’s previous advantage on ‘the deficit’, by setting out its own alternative commitment to its eventual elimination, and by offering to support the Coalition’s balanced budget bill in the New Year.
As soon as the politicians come back from the festive break, it will be game-on to seize control of the economic narrative. Different stories will be woven from the same data.
The risk is the process will only add further to the bafflement, and the appeal of ‘none of the above’.