How might 'the fundamentals' matter for the next election?

What are the political and economic factors that give us a clue about the likely outcome of the next election?

Last week, I suggested that a lot of speculation about prospects of the polls narrowing wasn’t engaging seriously with the underlying political and economic ‘fundamentals’ that drive election outcomes. But, if we are looking for clues as to the likely outcome of the next election, and signs that polls might narrow, what indicators should we be watching closely?

An obvious place to start is perceptions of party leaders. For over fifty years, pollsters like Gallup and Ipsos MORI have asked voters who would make the ‘best’ or the ‘most capable’ PM. Setting aside the way that the wording of this question naturally tends to favour the incumbent (posing the actual PM against a hypothetical PM), it is clear that having a leader who is seen as credible is crucial for voters. The figure below plots the lead of the governing party over their opponent in terms of vote share against the lead of the incumbent on this question in the final poll ahead of each election. Here we can see immediately that the Conservatives went down to a big defeat in 1997 under John Major, who was 17 points behind Tony Blair, while Labour went down to a smaller defeat in 2010 under Gordon Brown who was just four points behind David Cameron. The most notable outlier in 1979, where the Conservatives won despite Margaret Thatcher trailing Jim Callaghan by 19 points. As we will see, sometimes exceptions to these historical tendencies give most pause for reflection when thinking about the future.

Given the issues with the ‘best PM’ question, we can repeat this analysis instead using the net approval ratings of the leaders of the parties. Below we see the pattern is much clearer (the correlation, if you want to know, is an impressive r = 0.84 based on just 17 observations). Here the 1979 election looks less of an outlier and more notable is the 1970 election where a relatively popular PM (Harold Wilson) was turfed out for an opposition leader with comparatively poor ratings (Edward Heath). Currently, the net approval ratings for Rishi Sunak (-29) and Keir Starmer (-3) in Ipsos’s January poll, would put the government in a similar position to its Labour counterpart in 2010. Given today’s electoral geography, this might not leave Labour in an especially strong position. However, 1970, 1979, and 1992 offer notable precedents where governments underperformed the popularity of the PM relative to their opposition counterpart. If a 1997-style shellacking is really on the cards for the government, one would expect this gap to widen over time - either with Sunak’s ratings falling further or Starmer’s rising.

An alternative political fundamental to consider is overall satisfaction with the government. Below I plot this against swing towards or against the government, in part because this might be expected to indicate contexts in which the electorate vote against the incumbent. (Note that I don’t divide the swing by two as it the convention to illustrate the full magnitude of the change in electoral support at each election. OK, I also forgot when producing the graphs…) The pattern is noisier than for leaders, though there is still an apparent link between how good a job a government is seen to be doing and their fate at the ballot box. Notable variations are the governing parties across the 1955, 1959, 1964 and 1966 elections where the British public were just more satisfied with government overall - and even in three out of four of these instances the incumbent still enjoyed a swing towards it (just not on the scale that might have been predicted by later cases). The other clear outlier is 2019, where a government viewed extremely negatively secured a substantial swing towards it. Of course, the unique circumstances of that election relating to the Brexit impasse - and the fact that Boris Johnson was facing an extremely unpopular opponent in Jeremy Corbyn - may have had a lot to do with this often reliable predictor being so out of line with the election result. As I keep pointing out, to seemingly no avail, Boris Johnson was not especially popular and his government never enjoyed especially high approval - apart from during the highly unusual circumstances of the pandemic.

As I noted in my last post, the quickness of many commentators to dismiss the significance of economic factors in influencing prospects for the government is baffling. The most important chart in British politics - which I won’t plot on this occasion - is the trend for real wages over the past twenty years. The stagnation of earnings has profoundly affected a generation of workers and is surely contributing to the growing age divide in voting behaviour. Here I plot the relationship between economic optimism (mainly as measured by Ipsos MORI’s economic optimism index, with a couple of older Gallup surveys thrown in for February 1974 and 1979) and swing towards the government. The pattern again is noisier but in general it is clear that governments presiding over higher levels of economic confidence tend to do better at the ballot box. 1997 is a notable exception to this pattern, with Labour winning its landslide despite the public being broadly optimistic about the direction of the economy. This is also true to some extent for the 2010 election, highlighting how perhaps the greatest achievement of George Osborne was to dismantle the reputation of his opponents for handling of the economy (certainly placing above his actual contribution to the country’s long-term economic position). 2019 again is also a complete outlier - with the incumbent government securing a substantial swing towards it despite the deep economic pessimism of the electorate. The question the Conservative Party might ask itself as it approaches the next election (with economic optimism as measured by Ipsos MORI currently on -55, well outside the universe of past elections), is does it feel lucky?

The story is even clearer if we use annual growth in GDP as an objective measure of economic conditions. Broadly, governments tend to fare better with the electorate when the economy is growing. Two incumbents arguably stand out has having under-performed this relationship - the Major and Brown governments, with the former in particular going down to an electoral loss that simply did not reflect the economic fundamentals. What these governments had in common was that they had been in office for a considerable period (17 and 13 years respectively), something that might not be lost on the current administration - with the election likely to be held in its fourteenth year of office.

While the objective economic fundamentals clearly matter, perceptions of economic competence matter too. If we consider the relationship between swing towards (or against) the government and the lead of the governing party on handling of economic issues, it is evident that incumbents seen as more capable on the economy tend to do better. Here 1997 is much less of an outlier, with the Conservative Party’s reputation for economc competence having been substantially damaged by the ERM crisis in 1992. The risk for Rishi Sunak’s Conservatives is that the disastrous ‘mini-budget’ under Liz Truss will have done lasting damage to the party’s economic credentials. Rebuilding a reputation for economic competence may be difficult in a context where real wages continue to be squeezed.

As I noted earlier, it is possible for governments that have been in office a long time to find themselves on the wrong end of public opinion, even when the fundamentals are rather more in their favour. Some of this may be down to what we political scientists call ‘costs of governing’ - as time in office leads to the gradual accumulation of bad news and the incremental loss of support. As a crude proxy for this we can consider how the length of time a government has served in office is linked to its electoral performance. Below it is evident that some of the largest swings against incumbents were against those who had been in office for a long time - the Conservatives in 1964 (having been in office since 1951), the Conservatives in 1992 and 1997 (having been in office since 1979) and Labour in 2010 (having entered office in 1997). While time in office is an extremely crude measure of electoral context, it is nevertheless worth keeping it in mind as a factor that could drive a ‘time for change’ sentiment among voters.

Part of the value of this exercise, I hope, is to highlight just how few cases we tend to draw upon when making broad generalisations about what shape election outcomes. This is further in the context of a period when electorates, media and politics itself have all changed hugely.

So will it be leader ratings that matter at the next election? Or satisfaction with the government more widely? Will economic confidence matter, and will it rebound? Or has there been what Jim Callaghan, in his diaries about the lead up to the 1979 election, called a ‘sea change’ in public opinion. The problem often is that one doesn’t realise the tide is going out before it is too late.

Ultimately, each of these indicators might give a partial hint of how the next election could play out. On leader ratings alone, one might argue that Labour’s share of the vote might underperform current polling - though Rishi Sunak’s satisfaction ratings have been falling. Based on government approval, however, a defeat of the magnitude of 1997 could be possible - or the Conservatives might hope they are twice lucky, having already dodged that bullet in 2019.

I continue to believe that sustained pressure on the cost of living - even as inflation falls - poses a huge danger to the electoral prospects of the government, especially a government that has been in office for such a long time. Aside from undermining any turnaround in the economic situation more generally, the perception among voters that the PM and government is ‘out of touch’ (clearly a vulnerability based on the polling data) may make it difficult for them to get a hearing from a disillusioned public - even if there are modest improvements in the economy and public services. Only time will tell, of course.