Good morning from New Economy Brief.

Polls have dominated this general election, with the persistence of Labour’s mega-lead the campaign’s main story. But why is Labour’s lead so big? And to what extent is economics behind it?

This week, we look at how public opinion on the economy has shaped the election so far and what, if anything, it can tell us about what’s to come in the next Parliament.

The Truss crossover

It used to be said that the “Conservatives are efficient but cruel” while “Labour are caring but incompetent.” Particularly on the economy, the Conservatives are often seen as a safe pair of hands. But in 2022, that began to change. Throughout that year, the gap between Labour and the Conservatives on the question of “Which political party would be the best at handling the economy?” started to narrow. After the Truss/Kwarteng mini budget of late September 2022, Labour not only overtook the Conservatives on the economy question, but did so dramatically. YouGov’s poll in early October 2022 showed that 32% trusted Labour more with the economy, while only 15% trusted the Conservatives more. This was the first time in years that Labour had taken the lead on this question, and have maintained this lead ever since (although now with a less dramatic gap at 7 percentage points compared to 2022’s 14). If the Conservatives’ unique selling point is competence, and the public don’t believe that they can handle the economy, then their long odds of victory in the general election campaign start to make more sense.

Other public opinion trends since 2010. The voting landscape has changed enormously since the Conservatives first came to power, with some issues far more salient than they were in the early 2010s. According to a YouGov tracker, only 7% said the environment was one of the top issues facing the country in early 2011. A decade later, that figure reached 34%. Another key trend that has no doubt been shaped by austerity is the fall in anti-welfare sentiment. According to the National Centre for Social Research, while the percentage who think unemployment claimants are ‘fiddling in one way or another’ is still high (22%), it is down from 41% in 2004. Also, according to YouGov’s tracker, 50% say that the NHS is one of their top priorities compared to only 31% in 2010.

Precarity and public services

Economics doesn’t matter to people in the abstract – it matters when it affects their lives. And with a stubborn cost of living crisis and crumbling public services, it’s easy to see why the party that’s been in power for the past 14 years is still struggling to win the argument that their economic plan is working. Sunak’s pledge on the cost of living crisis was to halve inflation. Inflation is now back at the Bank of England’s target rate of 2%, far lower than its 2022 peak of 11.1%, and yet fewer than one in ten people think the crisis is over. The cost of living is usually the second most important issue for voters after the NHS, and when 80% of Britons believe the government has handled the crisis badly, it’s no surprise  that people are turning away from the Conservatives. Precarity is likely to be a huge factor in the outcome of the election, according to the Joseph Rowntree Foundation (JRF). JRF’s latest research finds that 39% of voters feel economically insecure, and that of these 18.5 million-odd people, 34% intend to vote Labour and 10% Conservative. But with Labour likely on the cusp of a majority, how do voters expect the next government to tackle the economy?

Tax is a red herring. One of the Conservatives’ key attack lines is that Labour will put up taxes. And indeed, whether they will or not has been one of journalists’ main questions to the Labour frontbench throughout the campaign. However, recent polling by the Stop the Squeeze campaign and YouGov suggests that this debate misunderstands the public’s priorities. The research, conducted in the final weeks of the campaign, found that Brits are far more worried about the cost of living than about post-election tax rises. Nearly half of those polled (43%) took this position, with only 16% saying they were more worried about tax rises. Likewise, pollster Sir John Curtice highlighted this week that voters are far more worried about the state of public services than they are about tax rises.

Borrowing is no longer the bogeyman. The Conservative-Liberal Democrat coalition came to power in 2010 promising to reduce the government debt/deficit. But at what might be the end of a Conservative-led government, how do the public feel about fiscal policy now? According to pollster Steve Akehurst, voters aren’t instinctively pro-borrowing but they much prefer it to the alternative: under-investment. Akehurst’s research, conducted by YouGov, found that with the exception of social security, voters are happy to see investment in all areas, even if it involves borrowing.

Great expectations

So, voters are far less bothered about borrowing and taxation than they once were, with public services declining and the cost of living very much on everyone’s mind. But they are also expecting, or even hoping for, more interventionist fiscal policy. Firstly, tax rises now feel like a given, with voters expecting the next government (whether Labour or Conservative!) to put up taxes. Similarly, a new poll by the Invest in Britain campaign shows that only 2% of Labour voters expect the party to cut public investment, with the overwhelming majority (72%) believing it would boost investment when in power. If Labour do win a large majority this week, they will have done so with the expectation of high tax and high spend.

The bigger picture

While the next government will be keen to keep the public onside around economic policy, we should remember a couple of key lessons. The first is that polling on individual issues doesn’t necessarily lead to political success. Many of the Conservative government’s economic policy decisions have been popular in isolation, but that has not saved the party from the voters’ judgement on their economic record as a whole. Finally, there are many vital economic issues which barely register with the public. For example, issues of global economic justice, such as the impact of climate change on the Global South and the need for loss and damage payments, have not featured in this campaign at all. But it would be a mistake for any government to think that these issues are unimportant. Similarly, if we are to learn anything from the last few years, it is that we cannot predict what economic action a government might need to take. A few years ago, the cost of living crisis barely featured as a phrase in public debate. Now, it is the number two issue for voters. With global instability and the climate crisis likely to cause future shocks, we may not even have heard about the next government’s big issue yet.

Weekly Updates

Election round-up

Going beyond ‘progressive realism’. Global Justice Now’s Nick Dearden highlights gaps in Labour's foreign policy plans. He says that a “truly progressive international policy” should “rethink how the Global North relates to the Global South” by supporting large-scale debt cancellation, more climate finance to developing countries, and more.

Finding capital for green investment through pension reform. Finance Innovation Lab’s Jesse Griffiths suggests that, instead of just consolidating Defined Benefit (DB) pension funds (as cited in Labour’s manifesto), the next government should look to reform Defined Contribution (DC) schemes to boost mandatory pension savings by at least a third, in order to create hundreds of billions of additional capital for green investment. Finance Innovation Lab’s recent paper explains how to create a fair, green pensions system that supports a productive economy

Inequality is driving support for the UK’s far-right. More than 30 leaders from business, academia and civil society have signed a letter to all party leaders warning that the “lack of political will to address unfairness and inequality” is “not only morally wrong, but is causing deep damage to our society, economy and democracy, and undermining the fight against the climate crisis”. The letter backs the findings of a new report from the Fairness Foundation calling for scrapping the two-child benefit cap, introducing an ‘essentials guarantee’ for Universal Credit, and more policies to reduce inequality. 

The political costs of austerity. Economist Paul Krugman has written for the Guardian arguing that the ‘unforced error’ of austerity may be the main driver of electoral disaster for the Conservative party: “At the time, this looked like an obvious macroeconomic error; more than a decade later, it has become a social and political catastrophe.” He also believes that a Labour government might “fall short” of reversing the damage of austerity due to less favourable borrowing conditions and a lack of “any ambition to reverse austerity”.

Reform UK’s corporate network. Autonomy Institute’s Data Unit have analysed notable companies connected to the Reform Party to produce a deep dive of Reform’s extended corporate network, including party chairman Richard Tice, Leave.EU, Nigel Farage, UKIP and more. The research features a wide range of businesses, such as Rwanda’s national airline, Bermudian land trusts, Britain’s answer to Breitbart, Michelle Mone’s crisis management firm, Big Brother Is Watching You Ltd, weight loss drinks, a ‘globo-Marxist white-eradicationist agenda’, and more.

Brown: 4.2m children in poverty is the country's “most urgent social issue”. Gordon Brown argues that the poor levels of Universal Credit (UC) provision has left charity (e.g. through food banks) to fill the gaps in the safety net, noting that the hardships of impoverished children are “a stain on the soul of our country”, and that “the sorrows of these millions of desolate children will remain forever a scar on our country’s conscience unless something is done.” He argues for a ‘root and branch review’ of UC, including the two-child benefit cap, bedroom tax and more.