Thursday, 16 January 2014

The UK General Election: a damn fine close run thing?

Regular readers of 'Public Policy and the Past' will know that this blog has been hugely underwhelmed by the UK Labour Party's poll showing and electoral performance since it lost power in 2010. Despite all the Government's near-farcical blunders - the tuition fees that willcost more than they save, the badger cull, the impending collapse of Universal Credit - the main Opposition has struggled to break away. Its poll lead has, if anything, slowly deflated over the last year. Now comes intelligence that the Party is scaling down its marginal seat effort to hold on to some of those it holds by only slender margins. And with every day that passes a quicker-than-expected economic recovery is eating away at the whole rationale of changing governments in the first place. For if things are going well, why should the voters seek to fix them?

The most important element in this equation is real wage rises. If real wages are still falling early in 2015, it is very hard to see most citizens thinking that the Coalition's boasts of better times mean anything at all. Most families have seen their real incomes retreat over this Parliament: if that's still the case at the end of this year, Labour's campaigns on the 'cost of living crisis' will have been well designed. If real wages are rising, even quite weakly as inflation falls, that cry will have much less salience.

The evidence is mixed at the moment. Some experts think that real wages will still fall this year. Certainly the UK's grotesquely bad productivity performance, endemic labour problems, investment numbers and current export record would seem to say that no-one should have a pay rise for years to come. The public sector, of course, will also be kept on a very short rein. Despite all the ridiculous recent talk of an end to the cost of living problem, prices even on the most benign measure are still going up twice as fast as pay packets are. But Britain's unbalanced economy has long slipped the moorings of earned reality. Rising house prices, more consumer spending and a rundown in the savings ratio - to be fair, the first indicators of economic spring in most recoveries - will probably push wages up however hard Britons are (or are not) working. A rapid economic recovery does seem likely to filter through to people's pockets sooner or later. From late summer of autumn, money coming in to households will probably start to move ahead of price rises for the first time since 2009.

That'll lift Conservative numbers. It'll make them electorally competitive in an extremely harsh electoral climate. But the electoral geography might still see them struggle, even in areas that are hardly thought of as electoral battlegrounds. It's very hard to imagine a scenario in which real wages will be rising in (say) Wales by the spring of 2015 - and although there aren't many Conservative-held seats there, three or four are very vulnerable indeed. If that Party is searching for a majority, it simply won't happen under those circumstances.

Rising real wages may well come to their rescue. But they're leaving it very, very, very late.

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