Not so much a poverty problem but a benefits problem

The context

This is a true story. Some years ago a Polish builder working in the UK suffered an accident at work in which his right hand was severely injured. Although he is perfectly capable of working with his left hand, prospective employers took one look at his injury and determined that he was unfit for work. Deprived of his ability to make a living, the man quickly burned through his savings, and came to rely on the £72 per week provided by Employment and Support Allowance (ESA). Not surprisingly he was unable to continue to pay for his accommodation and was soon reduced to living in a shed.

Last week, our builder showed up at a job centre in a well-to-do part of southern England to try and get some help with his circumstances. After having told his story, the first question he was asked by the officer dealing with his case was whether he had any health issues. Assuming that the question referred to supplementary issues other than his hand, he replied that he suffered from anaemia. The officer was about to press the enter button on the keyboard to finalise the data entry when another official who was observing the interview reminded them that the man had a serious hand injury.

It was then explained to our builder that he was eligible for housing benefit. Wonderful – some help at last. Except that in the Kafkaesque system employed in the UK, the recipient first has to find a place to live and only then are they entitled to support. Due to the shortage of social housing, those seeking somewhere to live are forced to rely on the private rental sector. Assuming you can find someone willing to rent their property, the landlord will ask for a deposit of 2-3 months’ rent. If you are living in a shed and surviving on £72 per week, the chances of saving up around £1,000 for a deposit are slim to none. To recap, this is a skilled workman who paid his taxes whilst he was working and by an unfortunate sequence of circumstances found himself living in a shed, in the middle of winter in what prides itself as being a rich civilised country. Furthermore, he cannot claim his housing benefit because he has nowhere to live.

I must admit to being shocked by this story and it is an eye-opener to realise that people are living in such circumstances in a so-called rich economy in the 21^st century. It would be easy at this point to say that Jeremy Corbyn was right after all, and that the electorate has mistakenly given a mandate to a Conservative government which is putting increased pressure on the poor. But I am not sure that this is the whole story.

The problem 

On a long-term basis, the evidence suggests that there was a sharp rise in relative poverty, but it occurred in the second half of the 1980s, during the second and third term Thatcher governments (as measured on an income basis, see p18 of this House of Commons Briefing Paper). It has been exacerbated by a sharp rise in housing costs, which means that income after housing costs has not recovered to the same extent as before-housing cost income where relative poverty levels have fallen moderately since the 1990s. The Social Metrics Commission, an independent group of experts which is working to understand and measure poverty in the UK, reckons that the proportion of people living in poverty (which takes into account factors such as income and housing costs) has fallen slightly since the middle of the last decade (chart) with a larger decline for pensioners than for other groups. Overall numbers have gone up, of course, but more slowly than growth in the total population.

I do not wish to suggest that poverty is not a problem, because it clearly is for a lot of people. But a far bigger problem appears to be issues with the benefit system itself. In summer 2018 the National Audit Office released a damning report on the rollout of Universal Credit (UC). UC was introduced in 2012 and was intended to simplify the benefits system by combining six benefits into one and to raise work incentives by promoting a system of benefit-tapering as people moved into work rather than ending state support altogether. However, as the NAO pointed out, the system did not initially work as intended and underwent several changes – one of the biggest was the 2015 decision by George Osborne to reduce the UC budget, which limited its effectiveness. 

One of the biggest failings of the system compared to previous benefits was the decision to pay out in arrears. Claimants do not receive any payment until five weeks after their first claim whereas under the previous system they were eligible for payment straight away. The well-documented rise in food bank use appears to be highly correlated with the introduction of UC, with the Trussell Trust reporting a 67% increase in the distribution of food parcels over the past five years, as claimants simply do not have sufficient funds to buy food. 

A (partial) solution 

I have no political axe to grind, not being a member of any political party. But as an economist with an interest in social justice issues, the first thing I would recommend to the new Conservative government is to take action to resolve the flaws in the UC system. This would go a long way towards helping those voters in those areas who “loaned” their votes to the Tories in exchange for “getting Brexit done.” An obvious fix would be to reduce the waiting time before benefits are paid out. Another possibility would be to reduce the UC taper rate. At present, the taper rate is set at 63% which means that for every £1 earned above the Work Allowance, benefit is reduced by 63p. According to the HMRC tax ready-reckoner, each £100 increase in Working Tax Credit costs the Exchequer £260 million versus a cost of £605 million for each £100 rise in the personal tax allowance, so altering the taper rate is a cheaper way of helping the truly low paid.

If the Conservative Party is serious about renewing its contract with the electorate, small fixes such as this could go much further than the big headline-grabbing proposals espoused by the main parties during their election campaigns. They will be cheaper too.

Johnson's jamboree

Wow! That was the election result the pollsters did not see coming. It was seismic for a number of reasons and it is hard to refute the view that Boris Johnson emerged as the most attractive candidate in a contest of the ugly. Even Johnson’s victory speech acknowledged that many voters who have not voted for them before may simply have loaned their votes to the Tories because: (a) they had no interest in backing Corbyn and (b) they really do want to “get Brexit done.” A big majority of 80 seats – the largest by any government since 2001 and the largest Tory majority since 1987 – gives Johnson a mandate to do more than deliver Brexit. If he plays it right, he could potentially cement the Tories in power for another decade, such is the catastrophic state of the opposition.

Labour lost it in more ways than one

Indeed, this was a result which requires Labour to reflect on where it wants to go next. This was its worst showing since 1935 in terms of seats (chart above), although its share of the vote was higher than in 1983, 1987, 2010 and 2015, But it nonetheless underscored the extent to which Labour has lost touch with its core voters and Thursday’s result was a damning indictment of the direction the party has taken under Jeremy Corbyn. I pointed out in 2016  that Corbyn was the wrong man at the wrong time and I was not taken in by the 2017 election result, attributing this to a  backlash against Brexit, particularly amongst younger voters who looked for Labour to oppose it. However, I was astonished by the extent to which his unpopularity amongst voters was even cited by his own MPs. Labour’s problems with anti-Semitism and the perception that Corbyn is a terrorist sympathiser do him no favours amongst ordinary voters. His inability to take a position on Brexit lost him the youth vote and he was roundly criticised for signing off on Labour’s tax-and-spend policy.

But Corbyn is merely one manifestation of Labour’s drift to the left. To hear some of his fellow travellers deny the reality of the party’s position in the wake of this resounding defeat is to realise that it will be a long way back for Labour before it can be considered electable. The party has traditionally performed well when it tacks towards the centre, as it did under Tony Blair. But when it drifts to the left as it did in the 1930s, 1980s and under Corbyn this tends to be a recipe for electoral disaster. Blair was a proven winner who tapped into the national Zeitgeist and it is a measure of how far Labour has moved that party activists would rather criticise Blair for his involvement in the Iraq War than recognise his election-winning genius. When Labour loses long-held seats in my native north-east England, you know the game is up.

Lib Dems demonstrate the ineptitude of the centrists

Whilst on the subject of opposition parties, the Liberal Democrats’ failure to capitalise on its centrist credentials was a spectacular indictment of its own failings. Slightly less than half of voters supported Remain but the Lib Dems managed to capture only 11.5% of votes and won just 11 seats – one less than in 2017, with leader Jo Swinson losing her seat. Let us not forget that the Lib Dems were the enablers of this election. However, their promise to revoke the Article 50 notification was a serious policy mistake as it reinforced the perception of a party that was prepared to ignore the wishes of those voters who favoured Brexit. Many people have asked me why they would do something so dumb. I think the answer is that they assumed Labour would back a referendum and they simply wanted to differentiate themselves. 

But by ruling out any cooperation with Corbyn, the Lib Dems are directly responsible for scuppering any chance of a Remain coalition that might have given them a fighting chance of achieving their goal of overturning Brexit. To put it bluntly, both the main opposition parties made too many strategic and tactical errors that were evident to anyone with more than a passing interest in politics. One does have to wonder who was in charge of the election strategy for both the main opposition parties, for they were spectacularly incompetent. Next time round, folks, I am available for hire - I certainly could not do any worse.

The Tories could not lose against this level of opposition

The Conservatives did not exactly fight a stellar campaign but they kept their message simple and did not tackle Labour head-on on their own ground. Johnson largely avoided making too many gaffes and his promise to move beyond Brexit clearly resonated with a large part of the electorate. My views on Johnson have been well documented on this blog over the years and they have not changed. But I have to admit that the Tories fought a well-disciplined campaign and they were canny enough to pick a fight they could win. The party knew that it had a good chance of beating a Corbyn-led Labour Party. It might have struggled against a more credible leader, although it would almost certainly not have pushed so hard for a winter election if they thought they might lose. As it is, their vote share of 43.6% has not been bettered since Margaret Thatcher’s 1979 victory (chart below).

I will deal with the outlook in future posts. But the key concern right now is whether we will see a party that tacks to the right, as many of its more prominent politicians appear to want, or whether a more centrist version of Johnson will emerge that permits a broader church.  Johnson has a big majority which means he will be far less reliant on a small number of MPs to ensure the passage of legislation. This raises the possibility that he may not need to push for a hard Brexit in order to keep his MPs onside – a luxury that Theresa May did not enjoy. He may also be more emollient on the question of extending the transition period than he sounds today.

 

Holding the union together will be a challenge

But there are some big issues on the horizon. The SNP won 48 of the 59 Scottish seats, implying that neither the Conservatives nor Labour will have much representation north of the border. It is clear that Scottish voters, who voted 62%-38% in favour of remaining in the EU in 2016, do not buy into the policies espoused by the main Westminster parties and the push for a second independence referendum will gather momentum.  Similarly, nationalist politicians now outnumber unionists in Northern Ireland for the first time, indicating a possibly more favourable view towards a united Ireland. Future Conservative governments will thus have to devote more attention to maintaining the union. It can no longer be taken for granted.

Can the Tories demonstrate they are about more than Brexit?

The mould has also been broken in another way. Whereas in the past Labour could rely on the votes of working class voters in the former industrial heartlands, that may no longer be true in future. A generation of Labour voters would not countenance voting for the Tories after their policies were deemed responsible for triggering a wave of deindustrialisation. That changed this week. This is a sign that the old tribal certainties are breaking down as younger voters are no longer influenced by the historical conflicts that shaped their parents’ generation. Maybe Boris Johnson still has the old magic; Heineken Man refreshing the parts that other politicians cannot reach, rather than Marmite Man who is loved and hated in equal measure. Maybe! Johnson has the potential to be the unifying candidate that the country needs. But he carries so much Brexit baggage that he will have to redouble his efforts to prove that the Tories are more than a single issue party. It is going to be an interesting ride.

The moment of untruth

As I put this post together we are a mere hours away from the UK's third general election in just over 4 years. By the time many of you read it, polling may be over. Almost all voters agree that this is an election too far with an unedifying set of choices on offer. On the one hand, Boris Johnson is merely seeking office for its own sake with no indication that he has a plan for the next five years. As I have noted on many occasions, the notion of “getting Brexit done” by 31 January is fanciful. The UK may be able to leave the EU but there is a long hard road ahead. On the other hand, Jeremy Corbyn represents a throwback to a form of socialism that was not even popular when it was fashionable. He has a clear agenda but it is not one that the majority of voters share and I maintain my long-standing view that Labour will fall short of their 2017 performance.

Trust has been badly eroded in recent years by the actions of politicians, with that process having gained momentum in the five months since Johnson took occupancy of Downing Street. Johnson has attempted to ride roughshod over parliament; has thrown his political allies under a bus and expelled 21 MPs from his own side in order to deliver a Brexit that in his heart of hearts, he surely does not believe in. The reputation of the media has also come in for serious scrutiny, with a large group of voters having lost trust in the impartiality of the BBC which is viewed as having given the Conservatives an easier ride. Former BBC insiders have queued up to suggest that the Corporation’s judgement on a host of news items has been somewhat lacking. I am not going to join the group of BBC bashers but the very fact that so many now question its role suggests that its hard won reputation will not easily recover.

And then there is the role of the judiciary, which was forced to step in when the government attempted to circumvent the parliamentary process. The Conservative manifesto promises to set up a Constitution, Democracy & Rights Commission in order to “look at the broader aspects of our constitution,” giving rise to fears that a Tory government may extract some form of revenge following its defeat at the hands of the Supreme Court.

Predicting the outcome of the election is a mug’s game when we are so close to the opening of the polls. But the updated results from YouGov’s MRP model, published yesterday, suggested that the Conservatives will win a majority of 28 seats – in line with my prediction from last week – and which is down from 68 in the results released two weeks ago. If we believe there is a 65-70% chance of a Tory majority and a 5% chance of an outright Labour win, this implies a probability of 25-30% of a hung parliament – in other words, not negligible but not a highly likely event. A majority in excess of 20 should easily allow a Conservative government to ratify the Withdrawal Agreement Bill (WAB) by January and permit it to pursue whatever form of trading arrangements it wants with the EU. Since the Tories have made it clear that they will not extend the transitional arrangements beyond the end of next year, there may be nothing to stop a government with a decent majority from triggering a hard Brexit at end-2020 – either by accident or design.

But given that there is a considerable margin of error attached to any election forecast, we cannot rule out the prospect of a Johnson government with a majority of less than 20. This would mean that Johnson would be as beholden to the lunatic fringe in his parliamentary party as Theresa May. He can still get the WAB over the line by January but his room for manoeuvre thereafter is likely to be limited as he will not be able to afford many Tory rebels on key pieces of legislation. Matters turn more complicated if the Tories remain the largest party but fall short of a majority. After all, the DUP will not help Johnson out after his betrayal over the Irish border question, and the election designed to bring the country back together will have proved to be another gamble that failed. There are other possible outcomes which do not involve the Conservatives in government at all, but we will look at those in the event they become a realistic prospect.

However, the fact remains that whatever the outcome, the country will remain divided on so many issues. Given the philosophical gap between the two main parties, it is hard to see much cross-party cooperation in parliament which sounds like a recipe for more of the fractious deadlock that has been the soundtrack to the last two years. As far as Brexit goes, Leavers may well have lost the war, largely thanks to the incompetence of Leave-supporting politicians, but they will not be assuaged. And those in favour of Brexit may yet experience buyer’s remorse if it does not go as planned. With the Brexit economic dividend remaining as elusive as the unicorn, I predict that GDP growth will remain sluggish – which in fairness will also be due to the ongoing global slowdown. But a lack of investment will mean that the capital stock slowly becomes less productive with the result that productivity growth – the key driver of living standards – will likely remain stuck in low gear.

Neither Labour nor the Tories will be able to deliver on their promises. Labour simply will not be able to boost spending as quickly as they plan: If they can get halfway to their targets they will be doing well. Meanwhile, the Conservatives will almost certainly expand fiscal policy by more than their manifesto currently suggests. Spending on the NHS will almost certainly have to rise because otherwise it is likely to be a vote loser for them by the time of the next election (on the assumption that Labour chooses an ABC leader – Anyone But Corbyn – to oppose Johnson). But rather than increase spending there have been suggestions that the Conservatives will cut taxes – something that was not in their manifesto – with Johnson indicating in a BBC interview that “in our first budget we propose to do more to cut taxes.” Whatever happens, fiscal deficits seem set to increase.

In just over 24 hours it will all be over. Whilst I don’t buy the Johnson slogan of “get Brexit done” I am sure I speak for millions when I say “get this election done.”

The election by numbers

After six weeks of campaigning the majority of British voters just want to put this election behind them, such has been the cynical nature of a plebiscite designed purely to give Boris Johnson a platform to continue doing whatever it is he wants to achieve as prime minister. Other than "getting Brexit done" most people do not know what he really wants. I suspect neither does he.

It has also been an election in which the issue of fake news has played a more witting role than in the past. We used to think that spin doctors had taken politics to new lows as they put the best gloss on their own policies whilst trashing the plans of the opposition. But today it is dominated by fake news merchants whose job is to repeat simple phrases ad infinitum, irrespective of whether they are true. In a bid to separate fact from fiction, my intention in this post is to boil down the election campaign into a series of key numbers which encapsulate the spin and counter spin of this unedifying campaign.

1. 83 billion. This is the amount of extra current spending (in pounds) that the Labour Party plans to undertake by fiscal year 2023-24. As noted in this post this is an attempt to finance Labour’s redistribution policy in which the biggest spending element is the £13.6bn cost of abolishing student tuition fees. This is offset by a huge rise in taxation, with more than half of the incidence falling on corporates, financial institutions and taxes on capital. Verdict: At least Labour are honest about their desire to raise tax and spending, but it does not appear to be going down well with the voters.
2. 58 billion. This is the amount of unfunded spending that Labour plans in order to recompense women who lost out on pension income as their retirement age was raised to match that of men. The IFS dismisses the policy thus: “The decision was taken at least 15 years before the increase in pension age and most in the group are relatively well off. To believe the whole group should receive compensation is a recipe for complete stasis in policy. How can you ever defend any policy which ever makes anyone worse off if you think this change in pension age, implemented with 15 years notice, designed to equalise treatment between men and women, and in the face of dramatic increases in life expectancy, is in some sense unethical?” Verdict: I’m with the IFS.
3. 50,000. The number of new nurses positions pledged by the Conservative government in its manifesto. But this figure includes an estimated 18,500 nurses who would otherwise quit the profession, implying that the number of new positions is only 31,500. Verdict: A shameless lie.
4. 20,000. The number of new police officers that a Conservative government intends to employ in the next parliament. It turns out to be a bone fide promise but it is only sufficient to restore the number of police officers back to where they were when the Conservatives assumed office in 2010. Verdict: A half truth.
5. 320. The number of seats that a government needs to win a parliamentary majority. The latest forecast from Electoral Calculus suggests that the Conservatives will win 348 seats (31 more than in 2017), giving a majority of 46. Verdict: The Conservatives look set for a convincing win although I would not want to put money on it, especially since the Tories are odds-on with the bookmakers’ at around 1-25 (i.e. you need to bet £25 in order to win £1).
6.  209. The lowest number of seats won by the Labour Party in the post-1945 era. This occurred in 1983 when the Labour Party fought on an avowedly left-wing agenda against a charismatic Conservative politician. Verdict: Labour likely to do better than in 1983 but the Electoral Calculus prediction of 225 would be the second lowest in the modern era. 
7. 49. The number of days between 13 December (the day after the election) and 31 January. This is the timeframe in which Boris Johnson believes he can “get Brexit done.” Verdict: Given a sufficiently large majority, the Conservatives could indeed get the Withdrawal Agreement Bill ratified by parliament, in which case the UK can leave the EU on 31 January. But Brexit will be far from done – the next stage is only just beginning.
8. 40. The number of new hospitals the Conservatives say they will build. In fact, the government has committed the money to upgrade just six hospitals by 2025. Up to 38 other hospitals have received money to plan for building work between 2025 and 2030, but not to actually begin any work. Verdict: Another distortion of economic reality by Boris Johnson's government.
9.  Zero. The probability that Nigel Farage will emerge as prime minister and to the nearest digit, the number of MPs that the Brexit Party is likely to send to Westminster. Verdict: Given Farage’s refusal to stand for parliament, having lost seven times previously, and given the Brexit Party’s lack of representation in Westminster, there is no justification for the British media to continue to give Farage a platform. If anything good comes out of the election, it will (hopefully) be the end of Farage as a semi-credible political force. 

Boiling down an election merely to numbers may be a crude way to distil the complexities of all parties' positions but this has been an exceptionally crude campaign. This is an election nobody wants at a time when people really have other things to look forward to. What a way to spend December.

Macronomics

In a recent fascinating interview with The Economist, French President Emmanuel Macron reiterated his long-held view that the EU has to adapt if it is to survive in a much-changed world. As Macron noted, things that were unthinkable five years ago are now the norm and that “if we don’t wake up … there’s a considerable risk that … we will no longer be in control of our destiny.” It is hard to disagree with this: The historically strong relationship between the US and Europe has become less anchored in recent years, initially as a result of Barack Obama’s pivot towards Asia and more lately thanks to Donald Trump’s retreat from rational policymaking. Since the EU is unable to rely on the US to help deal with the rise of China as a world power, whose interests do not chime with those of the EU, Macron believes that European nations have to act proactively in their own interests.

Whilst most European leaders would profoundly disagree with Macron’s assertion that NATO is “brain dead”, at the very least it should act as a rallying call for Europe to think about its place in the world. This week’s NATO summit in London was a chance for western leaders to get together, which is useful in itself, and even though no great decisions were taken it appears to have passed off cordially enough (the ongoing spat between Donald Trump and Justin Trudeau notwithstanding). But although forward-thinking European politicians will have to rethink what kind of Europe they want, there simply are not enough politicians who share Macron’s vision. Germany may be the economic powerhouse, but Angela Merkel is coming to the end of her tenure as Chancellor and her coalition government is more fragile than it was following the election of the Borjans-Esken duo as leaders of the SPD, both of whom are opposed to continuing the coalition with the CDU/CSU. Nor is the German economy currently in great shape as the economic motor splutters in the wake of the US-China trade dispute. The bottom line is that we should not expect Germany to contribute much to reshaping the EU in the next couple of years – like many countries, it is too preoccupied with domestic political issues.

But the problem is more than just political: The EU will have to focus on the kind of economic model it wants to pursue in future. As I pointed out long before the Brexit referendum, the EU has benefitted from the market-oriented model designed to enhance competitiveness which the British have helped to push in Brussels. However, the UK’s departure will significantly change the nature of the EU. For one thing it will change the balance of voting power. Around 80% of EU laws are ratified by qualified majority voting, meaning that they must be passed by 55% of member states representing at least 65% of the total EU population. Germany, the Netherlands, Austria and Finland, together with the UK, currently represent just over 35% of the EU population which gives the northern nations a blocking minority on policy matters. This will change once the UK leaves and concerns have been expressed, particularly in Germany, that countries opposed to market-oriented solutions could press for a weakening of EU competition policy, which has traditionally been dominated by ideas from the northern countries. This in turn would weaken the EU’s economic competitiveness.

Then there is the nature of the economic difficulties facing France which are likely to sap Macron’s energy to pursue EU-wide solutions. The latest wave of public dissatisfaction revolves around reform of state pensions, which has met with huge resistance and a wave of strikes brought the transport sector to a virtual standstill earlier this week. There is no doubt that an overhaul of the state pensions system is required, since it offers very generous state payouts to workers in certain sectors (railways, merchant seamen, energy workers and some niche workers at the likes of the Banque de France and l’Académie Française). Drivers on the Paris Metro, for example, are able to retire at 52 with an average monthly pension of €3500 whereas private sector workers, who retire at 62, receive only €1360 per month. All told, these special provisions cost the taxpayer €8bn per year (around 0.3% of GDP).

We have been here before, of course. A year ago, Macron’s efforts to impose a carbon tax met with huge resistance in the form of the Yellow Vest protests, which prompted him to put the policy on hold. Efforts in 1995 to reform the French economy were abandoned in the face of massive public protest. As the population ages, the state simply cannot afford to underwrite special privileges for any one group but it is a hard sell to get the electorate to understand that a system that has worked for the last 70 years will not fly in the 21^st century. I have a lot of time for Macron’s ideas but I do not believe that he will be successful in delivering domestic reforms on the scale he desires – there is simply too much resistance. This is not to say that he will not be partially successful – after all, things have changed since 1995 – but it may be left to a future generation of politicians to get where he wants to go. 

All this matters because Europe does not have the luxury of time to decide in which direction it wants to go. Indeed, the more I see how slowly reform is proceeding in France and Italy, the more I am convinced that the EU will be forced to concede that not all countries will be able to move forward at the same pace. Ironically this is the form of EU that the British would have been more comfortable with than the push towards a federalist system that grew out of the hubris of the 1990s. But as the world moves towards a world in which the US and China act as the poles of the geopolitical system, Europe cannot simply afford to pick one side. And this is where Macron is right – US and European interests are diverging, and the EU will have to steer its own course. NATO has to stand for more than “No Action, Talk Only”.

Uninspired choices

It remains difficult to get excited by the impending election in the UK which seems to be more of a low-key event than in 2017. One reason for this is that the majority of voters are suffering from election fatigue, with this being the fourth major plebiscite in just over four years (or five in just over five years if you live in Scotland). Nor is the electorate particularly enamoured of the choices on offer: Boris Johnson is widely expected to win a parliamentary majority only because voters have an even lower opinion of Jeremy Corbyn. It is an unfortunate fact that politics is more about personalities than policies which is why, despite the Tories’ inability to deliver on the latter, Labour is doing even worse on the former.

I highlighted in my previous post the perils of taking opinion poll data at face value and this article in The Guardian illustrates why. The article reflects on 10 years of vox pops conducted around the country in a bid to get as far away from the Westminster bubble as possible and illustrates the extent to which dissatisfaction is still the predominant theme amongst voters. The overriding theme is the feeling of alienation amongst many of those living outside London – an issue which many of those in the capital perhaps fail to appreciate. One of the writers, John Harris, points to the “regular explosions of annoyance about audience members on BBC1’s Question Time” (one of the BBC’s flagship topical debating forums) as evidence of the dissonance in public debate.

A recent example of this was observed during a Question Time debate when an audience member refused to accept that his salary in excess of £80k per year put him in the top 5% of earners, and that it was unfair of a prospective Labour government to make him pay more tax. He is wrong on the first point as the evidence here on the distribution of pre-tax incomes makes clear. But it is less clear that he is wrong on his second point: The gentleman may earn significantly more than the average wage but he is not necessarily in the upper echelons of the wealth distribution, since according to ONS estimates, the wealth held by the top 10% of households is around five times greater than the wealth of the bottom half of all households combined. As Torsten Bell of the think-tank The Resolution Foundation has pointed out, the disparity between the ultra-rich and the well-off has widened in recent years with the result that someone in the top 5% of the income distribution has more in common with the median earner than with the ultra-rich.

Whilst it is easy to be dismissive of our man in the Question Time audience due to the irrationality of his argument in the face of the evidence, he is tapping into a bigger problem. A large swathe of the electorate is suffering from “squeezed middle syndrome.” Real average weekly earnings, for example, are still almost 3% below the 2007 peak. Productivity growth may have been lousy, having risen by only 3% over the past decade, but it is still outstripping real wage growth implying that someone else is reaping the benefits of whatever modest productivity gains have been made. This is not just a British phenomenon – the trend in the US has been even more pronounced over the past two decades (chart below). It is hardly surprising, therefore, that voters are dissatisfied.

Many people have the sense from the UK election campaign that politicians are not talking about issues that involve them. The Labour vision of an economy with a greater emphasis on welfare provision and the protection of workers right sounds good in theory but Brexit is (ironically) the most pressing issue for the electorate (chart below). Accordingly Boris Johnson’s slogan about “getting Brexit done” does tap into what voters want, even though anyone with any understanding of the issue realises that Brexit will not be “done” merely by the UK leaving the EU on 31 January. But this is not the only issue on the agenda and Labour’s refrain that the NHS is safe in their hands, rather than the Conservatives, remains their main angle of attack.

At a time when the electorate is confused and angry at politicians for failing to deliver any improvement in living standards over the past decade, the competing visions of what the main parties want the UK to be and what they can offer to the electorate, do nothing to pour oil on the waters of unrest. There is no sense of broader engagement between politicians and the electorate across a range of policy areas. Neither of the two extremes are what people really want and as a result we will end up with the prime minister who voters dislike the least rather than the one offering the most compelling vision. Inflicting Brexit on a divided country with the near certainty that it will impose short-term economic costs suggests that the malaise that has been hanging over the UK for the past three years is unlikely to lift soon.

Second guessing the pollsters

With polling day less than two weeks away, this curiously flat election that nobody really wants has yet to take off. The opinion polls, for what they are worth, suggest that the Conservatives will easily gain a parliamentary majority as they enjoy a lead of 13 points over Labour. The Lib Dems are struggling to make themselves relevant and the Brexit Party has virtually disappeared as a coherent political force.

It was all so different in the spring, when the Conservatives, Labour, the Lib Dems and the Brexit Party were all capturing a similar share of the vote, around 20% (chart). Whatever else you might say about Boris Johnson, he has the ability to tap into what a lot of people want to hear, and by promising to “get Brexit done” he has consigned Nigel Farage to the political sidelines by taking votes away from the limited company masquerading as a political party. Jeremy Corbyn is unable to generate any form of feelgood factor. As I have long suspected he will not be in any position to repeat his decent performance in 2017 because he has dithered on Brexit, and in the eyes of many voters he is simply untrustworthy. Meanwhile, the Liberal Democrats’ new leader Jo Swinson does not come across well with voters and it increasingly looks as though her party’s commitment to revoke Article 50 was a major tactical blunder.

Whilst the opinion polls can be wrong, it certainly looks as though the opposition parties will have their work cut out to limit the extent of the Tories’ majority. Since the headline polls have proven to be a poor guide to electoral outcomes in the recent past, the commentariat paid a  lot of attention to the release this week of YouGov’s Multilevel Regression and Post-stratification (MRP) model results. This model, which correctly called a hung parliament in 2017 when predictions based on aggregate survey results indicated a large Conservative majority, suggests that on the basis of current data the Tories could win a 68 seat majority on 12 December. I briefly touched on MRP models in the wake of the 2017 election (here) but it is worth reminding ourselves of what political commentators – who would not normally care about regression models – are getting excited about.

The MRP model proceeds in two steps. First, YouGov builds a detailed description of UK local populations to determine the characteristics of each parliamentary constituency. The modellers then use YouGov survey data to determine how voting intentions are associated with individual population characteristics (e.g. how likely a person is to vote Conservative or Labour based on their education levels or their age). Combining these two pieces of information, using survey data from the preceding seven days, allows pollsters to predict voting intentions at the constituency level. It all sounds very scientific but a few points are worth noting. For one thing, a track record based on one set of observations is not very useful. As YouGov themselves note, “despite the strong performance of the method in the 2017 election, it is not magic and there are important limitations to keep in mind.” Second, it does not offer a prediction for what will happen at the election since data may change in the interim. Third, the model is only as reliable as the data input and we can never be sure whether respondents are telling the truth about their voting intentions. Finally, the sample sizes used in each constituency are very small and thus subject to significant sampling error.

Moreover, despite all the work which has gone into constructing the model, it does not generate significantly different results from a simple method which applies a uniform swing to each constituency. Whilst it would be nice to have access to all the data in order to generate an MRP model of my own, it is impossible for individuals to recreate a sample of 100,000 interviews in a short space of time. This got me thinking about whether there are other ways to generate constituency models and I report the results here, albeit subject to huge caveats.

Using Logit models to predict the election outcome

The starting point is to try and find readily available information on a constituency basis that might help us. I start from the premise that MPs who have strong local support and who recorded a solid majority last time out are more likely to be re-elected. Even if the MP is no longer standing for re-election, I assume they enjoy the benefit bequeathed by the previous incumbent. This is proxied by the size of the sitting MP’s majority relative to the total number of votes cast (or alternatively, the share of the vote achieved by the winning candidate). Since Brexit is such an important factor in this election we can also assess whether the constituency’s pro- or anti-Brexit bias is important in determining the outcome (see here for the results collated by Chris Hanretty). A final variable is the regional polling data which, although not available at the local constituency level, is assumed to be representative for each constituency in the region (e.g there are 73 constituencies in London and I assume that support for each party is broadly the same as the London average).

My model is designed to predict whether the incumbent party retains the seat at the 2019 election. To do this, I ran a series of qualitative choice models (technically akin to a Logit model with fixed effects) for each of the five main parties (Tories, Labour, Lib Dems, SNP and Plaid Cymru) across all constituencies in GB (Northern Ireland was excluded). Comparing the results for the five models across constituencies, I looked for the party with the highest probability of winning the seat. The central case forecasts gave the Conservatives between 333 and 351 seats (corresponding Labour figures: between 243 and 220). The SNP took anywhere between 37 and 44 seats in Scotland (though I reckon it could go as high as 50) whilst Plaid Cymru took between 3 and 5 Welsh seats. The model struggled to give the Lib Dems many seats at all. Even making some manual adjustments, it is difficult to see the Lib Dems picking up more than 15 seats.

How do the results compare with YouGov? The answer is pretty well. Their central scenario gives the Tories 359 seats; Labour 211; Lib Dems 13; the SNP 43 and Plaid Cymru 4. For a lot less effort (basically, some playing around with the data in a spreadsheet and a few lines of code in EViews) I can broadly replicate the results. Crucially, the evidence from both models suggests that the Tories can win an outright majority in the December election. As noted above, this is not a done deal by any means – there is a large margin of error associated with any such model. Electoral Calculus, which runs a similar model to YouGov, also looks for the Tories to win 331 seats (Labour 235) but with a range between 252 and 429 (Labour 141 to 304). You might think that is a sufficiently wide margin as to be meaningless, but they do ascribe a 63% probability to the chance of a Tory majority.

Reality does, of course, make fools of us all. But I am satisfied that my low budget modelling exercise replicates the work of the highly-paid pollsters. I can thus either get it right at a much lower cost – or can save someone a lot of money by getting it wrong for a lot less