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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Beware, hard Brexiteers - Ruth Davidson is coming for you

The Scottish Conservative leader is well-positioned to fight. 

Wanted: Charismatic leader with working-class roots and a populist touch who can take on the Brexiteers, including some in the government, and do so convincingly.

Enter Ruth Davidson. 

While many Tory MPs quietly share her opposition to a hard Brexit, those who dare to be loud tend to be backbenchers like Anna Soubry and Nicky Morgan. 

By contrast, the Scottish Conservative leader already has huge credibility for rebuilding her party north of the border. Her appearances in the last days of the EU referendum campaign made her a star in the south as well. And she has no qualms about making a joke at Boris Johnson’s expense

Speaking at the Institute of Directors on Monday, Davidson said Brexiteers like Nigel Farage should stop “needling” European leaders.

“I say to the Ukip politicians, when they chuckle and bray about the result in June, grow up,” she declared. “Let us show a bit more respect for these European neighbours and allies.”

Davidson is particularly concerned that Brexiteers underestimate the deeply emotional and political response of other EU nations. 

The negotiations will be 27 to 1, she pointed out: “I would suggest that macho, beer swilling, posturing at the golf club bar isn’t going to get us anywhere.”

At a time when free trade is increasingly a dirty word, Davidson is also striking in her defence of the single market. As a child, she recalls, every plate of food on the table was there because her father, a self-made businessman, had "made stuff and sold it abroad". 

She attacked the Daily Mail for its front cover branding the judges who ruled against the government’s bid to trigger Article 50 “enemies of the people”. 

When the headline was published, Theresa May and Cabinet ministers stressed the freedom of the press. By contrast, Davidson, a former journalist, said that to undermine “the guardians of our democracy” in this way was “an utter disgrace”. 

Davidson might have chosen Ukip and the Daily Mail to skewer, but her attacks could apply to certain Brexiteers in her party as well. 

When The Staggers enquired whether this included the Italy-baiting Foreign Secretary Johnson, she launched a somewhat muted defence.

Saying she was “surprised by the way Boris has taken to the job”, she added: “To be honest, when you have got such a big thing happening and when you have a team in place that has been doing the preparatory work, it doesn’t make sense to reshuffle the benches."

Nevertheless, despite her outsider role, the team matters to Davidson. Part of her electoral success in Scotland is down the way she has capitalised on the anti-independence feeling after the Scottish referendum. If the UK heads for a hard Brexit, she too will have to fend off accusations that her party is the party of division. 

Indeed, for all her jibes at the Brexiteers, Davidson has a serious message. Since the EU referendum, she is “beginning to see embryos of where Scotland has gone post-referendum”. And, she warned: “I do not think we want that division.”

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.