Cameron and Osborne are benefiting after three years of a crippled economy. Photo: Getty.
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Will the economy hand Tories the election?

The recovery may be feeble, but voters are rewarding the Tories as GDP rises – and the 'cost-of-living' is half the issue it was in 2011.

What issues will decide next year’s general election? For the major parties, the challenge is making their issues the topic of national debate.

For the Tories that means focusing on the economy, immigration and crime.

For Labour, it means steering every news agenda towards health, education and housing.

The Tories are the more trusted stewards. Voters back them to safeguard our finances, control our borders and police the streets – despite three years of sluggish growth, uncurbed immigration levels and cuts in police numbers.

Nevertheless, they are far more trusted on each of those issues than Labour. But, if the Tories are trusted to apportion the money, voters would prefer Ed Miliband’s party spend it.

This reflects a trend across developed democracies. Voters want Scandinavian levels of spending but want to pay Texan-level taxes. They want left-wing parties when asked about their public services but right-wing ones when asked about actually managing the economy or country.

That is what makes Ed Balls’ speech today on taxes and wages interesting. While Labour are reportedly going to focus on the NHS over the summer, Balls is showing how Labour will challenge the economic recovery being trumpeted by the Coalition.

Balls is doing this even though the government’s economic approval rating has dramatically recovered in the past year, buoyed by near 4 per cent growth.

This is despite only a few voters thinking the economy is on the way to recovery. But more voters think the UK is at least now showing signs of it – which most didn’t in 2013.

And in welcome news for the country, if bad news for Labour, the number of voters feeling the cost-of-living crisis has halved in the past three years.

In October 2011, 49 per cent of people were worried they wouldn’t have enough money to live comfortably. Now 25 per cent are.

This is slightly at odds with what has happened to real wages over the past four years. As George Eaton noted today, “Labour will still be able to go into the general election and answer Ronald Reagan’s question – “Are you better off than you were four years ago?” – in the negative”.

That is because inflation has outstripped people’s wages throughout this parliament.

But this appears to have little effect on the government’s economic approval ratings.

Headline GDP appears to be the only statistic that matters. At first glance there is little link between GDP and economic approval.

But, by using a three-month rolling average of GDP, we can uncover a relationship. 

The data implies that if GDP growth were 0 per cent, the government's economic approval would be -30 per cent. But for every 1 per cent of quarterly GDP growth, their approval increases 24 per cent. The realtionship is not that strong – GDP growth explains only about half of the approval rating (R² = 48 per cent) – but there is a link, as we might expect.

The importance of the economy in predicting elections is widely recognised in academic work.

As one paper recently put it, “If all you know is the state of the economy, you know pretty well how the incumbent party will do”. Nate Silver agreed – a composite measure of economic health was one of the pillars of his perfect predictions in 2012.

The fact that link appears to exists for the Tories is worrying for Labour. Until very recently, the economy had been the number one issue for voters throughout this parliament.

The growth of the past year, and the recent UKIP-fuelled focus on immigration, has changed that, but that’s more encouraging for the Tories than Labour – it’s another sign of the recovery.

This is why Labour are zeroing in on the NHS. It is the only issue on which they both have a significant lead and voters care much about (education and housing are not rated as top issues by most voters).

Immigration helps UKIP more than either party, but it helps the Tories before Labour – as their attempt to lead the news with it yesterday showed.

Labour can try and make the NHS the election’s pivotal issue, but this parliament has been defined by the economy. If GDP stays strong the left may face another five years in the wilderness.

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Metro mayors can help Labour return to government

Labour champions in the new city regions can help their party at the national level too.

2017 will mark the inaugural elections of directly-elected metro mayors across England. In all cases, these mayor and cabinet combined authorities are situated in Labour heartlands, and as such Labour should look confidently at winning the whole slate.

Beyond the good press winning again will generate, these offices provide an avenue for Labour to showcase good governance, and imperatively, provide vocal opposition to the constraints of local government by Tory cuts.

The introduction of the Mayor of London in 2000 has provided a blueprint for how the media can provide a platform for media-friendly leadership. It has also demonstrated the ease that the office allows for attribution of successes to that individual and party – or misappropriated in context of Boris Bikes and to a lesser extent the London Olympics.

While without the same extent of the powers of the sui generis mayor of the capital, the prospect of additional metro-mayors provide an opportunity for replicating these successes while providing experience for Labour big-hitters to develop themselves in government. This opportunity hasn’t gone unnoticed, and after Sadiq Khan’s victory in London has shown that the role can grow beyond the limitations – perceived or otherwise - of the Corbyn shadow cabinet while strengthening team Labour’s credibility by actually being in power.

Shadow Health Secretary and former leadership candidate Andy Burnham’s announcement last week for Greater Manchester was the first big hitter to make his intention known. The rising star of Luciana Berger, another member of Labour’s health team, is known to be considering a run in the Liverpool City Region. Could we also see them joined by the juggernaut of Liam Byrne in the West Midlands, or next-generation Catherine McKinnell in the North East?

If we can get a pantheon of champions elected across these city regions, to what extent can this have an influence on national elections? These new metro areas represent around 11.5 million people, rising to over 20 million if you include Sadiq’s Greater London. While no doubt that is an impressive audience that our Labour pantheon are able to demonstrate leadership to, there are limitations. 80 of the 94 existing Westminster seats who are covered under the jurisdiction of the new metro-mayors are already Labour seats. While imperative to solidify our current base for any potential further electoral decline, in order to maximise the impact that this team can have on Labour’s resurgence there needs to be visibility beyond residents.

The impact of business is one example where such influence can be extended. Andy Burnham for example has outlined his case to make Greater Manchester the creative capital of the UK. According to the ONS about 150,000 people commute into Greater Manchester, which is two constituency’s worth of people that can be directly influenced by the Mayor of Greater Manchester.

Despite these calculations and similar ones that can be made in other city-regions, the real opportunity with selecting the right Labour candidates is the media impact these champion mayors can make on the national debate. This projects the influence from the relatively-safe Labour regions across the country. This is particularly important to press the blame of any tightening of belts in local fiscal policy on the national Tory government’s cuts. We need individuals who have characteristics of cabinet-level experience, inspiring leadership, high profile campaigning experience and tough talking opposition credentials to support the national party leadership put the Tory’s on the narrative back foot.

That is not to say there are not fine local council leaders and technocrats who’s experience and governance experience at vital to Labour producing local successes. But the media don’t really care who number two is, and these individuals are best serving the national agenda for the party if they support A-listers who can shine a bright spotlight on our successes and Tory mismanagement.

If Jeremy Corbyn and the party are able to topple the Conservatives come next election, then all the better that we have a diverse team playing their part both on the front bench and in the pantheon of metro-mayors. If despite our best efforts Jeremy’s leadership falls short, then we will have experienced leaders in waiting who have been able to afford some distance from the front-bench, untainted and able to take the party’s plan B forward.