Morning:
8°c
IT'S probably just the weather. But this week, I found myself asking whether there is a chance, however slight, that the economy could be on the turn. On Saturday Anthony Bolton, a star City fund manager described by the Financial Times as "the nearest thing this country has to a Warren Buffett", called a bottom to the stock market. "I'm not saying there isn't going to be any more negative news," he said, "but I think there are the first signs of things maybe changing for the better."
On Sunday, Ben Bernanke, chairman of the US Federal Reserve, said: "This decline will begin to moderate and we'll begin to see a levelling off." Bernanke predicted that the recession will "end probably this year", with "recovery beginning next year". Some of the biggest US banks have reported better-than-expected results. Shares have had a good 10 days. Retail sales, in London at least, have not been half as poor as anyone feared.
Of course, there is still a great deal of bad news to outweigh the good. The IMF says Britain faces the longest recession in the industrialised world. US output is tumbling faster than a barrel over Niagara Falls; British unemployment has topped two million; even the people who bought Mr Bernanke's old childhood home have had it repossessed.
The financial system remains burdened by huge, often toxic, debt. It is far from clear that property prices - one of the foundations, or millstones, of the modern economy - have reached their trough, either here or in the US. Public and political fear is still huge. Mr Bolton called a bottom to stocks in November, too, in what turned out to be a short-lived "bear market rally" that barely broke the FTSE's downward plunge.
So we need more data. But for those of us commentators without much of a track record on reading the economy (that is, all of us except Vince Cable), an even more interesting question is what a potential upturn means for the Government.
A poll yesterday reported that if Bernanke is right, and the economy starts to recover in 2010, nine per cent of Tory voters "are more likely to consider voting Labour". With a stable 10-12 point Tory lead in all the recent polls, nine per cent doesn't sound good enough. But under our perverse electoral system a Tory lead cut to only a few points could in fact deliver a minority Labour government.
Added to this is the conventional wisdom that the Tory advantage will narrow as the election approaches; that governments "always recover" as they move out of midterm. So is Gordon set for yet another miracle of deliverance, or is it just one of those bear market rallies?
Alas for Labour, the idea that governments always recover is a political myth. Mike Smithson of politicalbetting.com, one of the country's best commentators on polls, says that "there is nothing in modern polling history to suggest that [a swingback] will happen".
What actually happened until comparatively recently was that most opinion pollsters consistently overstated Labour support. In 1992, of course, that led many polls actually to get the result wrong, and predict a Labour victory.
The election result was then written up by journalists and commentators as a swingback from opposition to government. But the swingback thesis was nothing more than a consequence of faulty polling. Over the past decade, all the pollsters have reformed their methods to achieve more accurate polls and more politically balanced samples. In these reformed polls, there is very little evidence of any move back from opposition to government, either now, over the past three months, or at the equivalent stage of previous election cycles.
Some other figures from that poll yesterday make depressing reading for Gordon Brown, adding to the growing weight of evidence that, economic recovery or not, the people of Britain have made up their minds.
David Cameron's personal lead over the Prime Minister has risen to 21 points, an increase of 13 since April 2008 - which was itself a very good month for the Tories. Asked to choose between "continuity" and "change", a very high 69 per cent of voters plump for "change". Sixty-six per cent of voters, including 27 per cent of Labour voters, think that the party has "run out of steam and out of ideas".
And even if the economy starts to recover, it is by no means clear that it will be felt in the places that matter, the homes and wallets of Middle England, in time for a May 2010 election. Redundancies and confidence are lagging indicators.
Nor, most importantly, is it at all obvious that Mr Brown will get the credit. The fact that only nine per cent of Tory supporters might be "more likely" to "consider" voting Labour in the event of a recovery suggests voters are not, at this stage, overly disposed to generosity.
Between 1992 and 1997, the Tories presided over a marked economic recovery - but were denied all credit by the voters because of Black Wednesday. The parallel with now is not exact. The failure of policy is not as clear as it was then.
But Mr Brown's reluctance to accept responsibility has contributed to a general atmospheric of dissatisfaction. The purpose he displayed in the autumn has dissipated in a blizzard of initiatives - and even if the economy does recover, it will be difficult to argue that any of them has played much part in it. If the IMF is right, and Britain is later out of recession than others, that will clearly damage Brown and undermine any claim he may have to be the agent of recovery.
Public spending will be Gordon's last card. Any future government will have to make cuts. But a Tory government would probably make bigger ones - and this is where London has most to fear. The Mayor's huge budget - nearly all of it handed out to him by Whitehall - makes a tempting target, and it would probably be easier for a Tory chancellor to cut it than a Labour one. For reasons of party unity, Boris might not be able to object too loudly if the axe were to fall.
Vote Brown - Save Boris makes a difficult rallying cry. And all the signs are that, after the waste of the past, even public spending will not swing it for Gordon. The die may not quite be cast but the game is nearly over and it's not clear the PM has anything left to stop it.
Reader views (7)
Dhanraj. The Tories won't win the next election. The Labour Party will lose it. It happened in 1997 (when Labour won) and it will happen again whenever the election is held.
- Ian Gilbertson, Newcastle, 19/03/2009 16:59
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if any of your readers come across Tom Bowers book "Gordon Brown" tell them to read it. its the most facinating book I have read in years, I have just finished the second reading.until you read it its hard to imagine the amount of money wasted in hindsight, the trouble is they never learn do they. but lying is Flash Gordon's achilles heel, he cant help it and it will destroy him.please god.
- Ken Moody, sheffield, 19/03/2009 15:11
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None of Anthony Bolton, Ben Bernanke or Warren Buffet spotted the crash coming, so I'd prefer to wait and assume the worst.
- Paul Freeman, London, England, 19/03/2009 14:44
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The fact is The Tories simply haven't put forward any convincing arguments as to why they should be the next Government. The ekectorate remembers only too well 18 years of Tory rule which ended in 4 mn unemployed, deliberately brought on through their disastrous policies. Never again!
- Dhanraj, basildon, 19/03/2009 14:21
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Questions:
Why has Crossrail got a team in its offices looking at the airport?
Why is the new Crossrail Chief Executive going to be paid £1M each year with bonus?
- Anon, London, 19/03/2009 13:42
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The fact that I find utterly astonishing is the fact that there are still a significant number od people in Britain who are denial about the damage Nu Labor have wreaked right across Britain. Everything they have touched is a fiasco. Schools, immigration, NHS, taxation, corruption, the armed forces, debt, regulation, pensions, budget deficit. Name a single success? I cannot think of onthink of a single thing that they have acheived for the better. Ah yes even the jobs data is garbage, thtey built up their client state of government workers with their gold plated pensions and screwed the private sector whose pensions lie in tatters! Still people want to vote for them?
- James Macleod Ritchie, Oyster Bay Cove, 19/03/2009 13:32
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What seems to be missing in this article is that taxes are rising and will do so for several years to pay for Brown and Darling's bailouts. "Real" inflation is also rising (i.e. the cost of weekly shopping, utility bills, filling your car, public transport). This means that we all have less money in our pockets. Most importantly, lots of people in the private sector are losing their jobs. Meanwhile, the public sector is expanding, creating posts and projects that cannot be justified, paying pensions that cannot be funded. To cap it all, MPs and Lords have their noses so far in the expenses and policy-buying trough, that they should not be trusted to continue in office any longer.
The stock market can go up; house prices can stabilise. But we won't forget that Labour has royally ruined this country over the past 12 years and will not be re-elected in 2010.
- Nobby Clark, Perth, Scotland, 19/03/2009 11:49
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