This is what Balls was waving at Osborne twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) March 20, 2013
A year ago Betfair punters rated Osborne’s CON leadership chances at 24%. Today’s last trade 5.5% twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) March 20, 2013
William Hill’s budget specials. bit.ly/u6wr8r twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) March 20, 2013
PaddyPower “cliche” budget specials. Some interesting bets bit.ly/I8PkIO twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) March 20, 2013
After a cold and dark winter, the sight of spring flowers defiantly if tentatively piercing the earth and braving the still chill winds is always something to raise the spirits; a pointer to sunnier days ahead. As with nature, so with economics: recoveries from recessions are usually patchy and slow to begin with but there comes a point where despite the bitter blasts from the continent, growth is at long last returning.
To write that on the day that figures showed the construction industry to be deep in recession may seem strange but construction, as an investment sector, both lags the general cycle and also experiences much wilder swings, up and down. It is a good indicator of where things have been but a poor one of where they are going.
A better one is employment. Businesses might delay laying off people in tough times but they don’t employ more unless they think things are picking up. Despite the job losses in the public sector, employment in Britain has never been higher – and the increase accelerating towards the end of the year – while unemployment has been falling since the end of 2011. With house prices beginning to edge up and the stock market having surged to pre-recession levels, people and businesses should begin to feel less concerned about needing to put money aside in case of negative equity, pension-fund deficits or depreciated assets.
Not that you will hear talk of green shoots from the Chancellor in his Budget speech a week on Wednesday. Apart from harking back to earlier, premature, sightings of economic recovery, it also implies that the good times are around the corner. To lead people to believe that would be a serious mistake: even if a recovery is under way, it will not feel much like it.
One factor in the disparity between the lacklustre growth figures and strong employment numbers has been incomes rising more slowly than prices – something in which there’s little reason to expect much change. In addition, as and when a recovery does occur, interest rates will start climbing from their 300-year lows.
Politically, it won’t make much difference either way to the debate. In the absence of a recovery, the Conservatives will say that extra borrowing is ever more unaffordable and Labour will reply that it’s all the more necessary; if one does become established, the Tories will argue that their policy has been a success and must be maintained while Labour will say the growth renders further cuts unnecessary. On their performance this week, what the Lib Dems say will depend whether it’s Clegg or Cable saying it. Who knows – that might even be the most effective strategy.
Where it might make a difference is in the question of economic competence. If Plan A does look to have worked, the willingness of the electorate to stick with it, even if it’s hurting, may well increase – as in 1992.
You can get 3/1 with PaddyPower that Osborne will not be Chancellor by end of year. twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) February 24, 2013
In practical terms, the loss of the UK’s triple-A credit rating with one of the three main agencies is unlikely to have much impact. France and the USA have both been through the same process without undue trauma, and besides, there’s enough information and interest in the sovereign debt of large countries that the ratings agencies tend to follow the market rather than lead it.
By contrast, the political effects of the downgrade are likely to be devastating. The government and George Osborne in particular have staked a considerable amount of credibility on the maintenance of the AAA rating and both have now been lost. It’s not simply the initial event; it’s that unless there’s a change, Osborne is now going to have to try to explain why it didn’t really matter after all. As Callaghan recognised on the devaluation of sterling in 1967 and Major came to realise about Lamont, following Britain’s ejection from the ERM, this is a task that’s near to impossible.
This might seem unfair. In some ways, Osborne’s been a reasonable Chancellor. The agreements on money hidden in tax havens, the overseeing of employment growth despite the poor GDP figures and the overall deficit reduction strategy are all positives. They are not, however enough. Were the credit rating issue the only problem, his position might be salvable; it isn’t. In reality, it’s the third serious negative he has to contend with.
The first – and one he recognised before the 2010 election – is that he doesn’t come across well in the media. Given that the economy will be central to the political debate between now and 2015, that’s a major handicap the coalition and in particular the Conservatives have. It’s true that he and Cameron still compare favourably to Miliband and Balls in terms of economic trust (or did do so – who knows how the polls will now move) but one thing the government’s not been that effective at recently is in explaining the basis for its deficit-reduction policy: its inheritance and the inability of the country to live beyond its means. If the debate remains focussed on winners and losers, it’s in trouble.
The second is the wholly self-inflicted political error of the top rate income tax cut. There may have been good economic reasons for it but in that single move, the government – and particularly Osborne and the Tories – undermined ‘all in it together’. It is extremely difficult to justify effectively why lowish earners should have pay frozen when those at the top are seeing pay cut. That the top rate is 5p in the £ higher than it was for most of Labour’s time in office and that the 50p rate probably brought in little additional income is beside the point: the cut was and remains terrible PR.
After that, the loss of the AAA status – one of the key measures on which Osborne asked to be judged – ought to be the final nail in the coffin.
There are options in terms of replacements – Hague, Hammond, Gove or May could all do the job, with May ticking the most boxes (her sometimes rocky ride at the Home Office has been more down to officialdom rather than political judgement) – and in these things, it’s best for a PM to take the initiative rather than end up being forced. Alternatively, were Osborne to offer his resignation, he may ultimately survive, as Callaghan did. Will he go? Not immediately, I suspect. There is the matter of the Budget to come and that may be a sufficient shield in the short term but the pressure is unlikely to subside and will find an outlet, one way or another.
A great pic of George Osborne from PMQs twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) January 9, 2013
It’s been a big week politically for George Osborne with his strategy on the 1% limit on benfit increases being the main domestic political news of 2013.
The polling has been ambivlent and I’m not totally convinced that either Labour or the Tories have got this right. Only time will tell.
But what this has surely underlined is the central role that Osborne plays in this government and how Dave is totally reliant on him. It’s for that reason that I treat predictions of Osborne’s imminent political demise with a large pinch of salt.
But if anything happened to Dave then we’ve got a whole new ball-game.
Ladbrokes have the best price of 7/4 that Osborne will be be replaced while Stan James have 1/2 that he won’t.
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Commenting on today’s Mail on Sunday Survation poll that has CON 29: LAB 38: LD 11: UKIP 16 Professor John Curtice of Strathclyde University said:-
“…..an election that would otherwise look like a reasonably close contest looks like an easy walkover for Labour.
Tory supporters have been unhappy with the Government ever since George Osborne’s omnishambles Budget.
I would expect UKIP to fall away to some degree by the Election but the only way the Tories can put things right is by restoring their reputation for competence.’
It’s now nearly 10 months since George Osborne announced his 2012 budget – what looks like the pivotal event of this government, This was the moment that polls suggest that the big switch from the Tories began.
Curtce always argues that a big driver of opinion is the perception of competence in the government. Once that goes it’s hard to turn it round.
John Major’s government lost it during those difficult years for the Tories in the mid-90s and never recovered. Gordon Brown saw it wither away after the general election that never was in October 2007.
Last weekend I started betting heavily on a LAB overall majorty. I got on at longer than 2.5 – or 6/4 in old money. As I write the last price traded on Betfair was 2.16 and it’s not hard to envisage the LAB overall price touching evens in the coming weeks.
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LAB says that numbers hit working families benefits cap exceeds CON majorities in key marginals guardian.co.uk/politics/2012/… twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) December 12, 2012
@msmithsonpb Brown put working people Tories need for a majority on Tax credits. Osbornes strapped himself to another Brown booby trap.
— David Morton (@DavidMorton359) December 12, 2012
In an interesting move overnight Labour has published HMRC data showing the precise number of working families in key CON-held marginals who will be affected by the Chancellor’s announcement a week ago that a cap is to be put on tax credit increases for the next three years.
This will be voted on in the Commons and Osborne has challenged Labour to vote against the move in what looks set to be a general election issue.
But there is a big difference between those who are claimants and those working who receive tax credits.
By linking the move to the number of such families who will be affected in key CON-held marginals Labour is seeking to make this into local story in dozens of constituencies across the country. This is a good taster of how its general campaign will play out.
For ultimately this is a PR battle over quite complex issues. I’m yet to be convinced that either Labour or the Tories have the communications fire-power to get their positions over effecitvely.
The Tories and Labour need politicians more plausible and voter friendly than either George Osborne or Ed Balls.
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How the Financial Times sums up Osborne’s statement twitter.com/MSmithsonPB/st…
— Mike Smithson (@MSmithsonPB) December 5, 2012
— Mike Smithson (@MSmithsonPB) December 5, 2012
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