E for Election and E for Effort

The UK general election campaign, announced on April 18th, has been rather uninspiring so far. Whether is it a symptom of “democracy-fatigue” following two tight referenda and a hotly-contested, general election in the last 33 months, or an associated lack of funds amongst the political parties, or just the boredom of an election where the result seems obvious, no one seems to be putting in very much effort this time around in order to win it!

Theresa May, whose decision it was to call the election, appears to have decided that all she needs to do to win her expected larger majority, is to repeat “strong and stable government” at every opportunity and be photographed at various stage-managed events where all the questions and questioners are pre-selected. She has refused to enter into any direct debate with other party leaders. She has sought to frame the election as a choice of leader to take Britain through the Brexit negotiations, between herself and Jeremy Corbyn. Given her strong personal ratings and his weak personal ratings, she appears quite happy for media attention to focus on the him and the Labour party.

She has led the production of a vague and uncosted manifesto, particularly around Brexit, she has surprised many by some surprisingly detailed policies that work to the financial disadvantage of a core group of her supporters, the over-65s. All-in-all, she is giving the impression of expecting to win very easily and thus does not need to try too hard to gain votes.

For Jeremy Corbyn, this is the moment he has dreamed of – the chance to put in front of the UK electorate a Socialist manifesto and vision for the UK. However, it appears that his goal is not to win the election, but merely to do well enough that the left wing of the Labour party can say that there is a real demand for their ideas amongst a substantial section of the UK electorate. His campaign strategy has therefore concentrated on appearances in areas traditionally considered solidly Labour. His focus is on getting out that core Labour vote, and very little time of effort is being devoted to taking that manifesto to the rest of the country.

The UK Independence Party, which for many has achieved its original purpose of taking Britain out of the EU, is suffering from internal divisions and a lack of leadership and of money. – they are fielding many fewer candidates in the election, which they are justifying by saying they do not wish to put up candidates against previous strong proponents of Brexit.

Somewhat similarly, the Green Party has stood down candidates in a number of constituencies where they are seeking to promote a progressive alliance, and believe that a Liberal Democrat or Labour candidate would have a serious chance of defeating the Conservative candidate. Sadly for them, apart from in Brighton, the other parties have not acted in a reciprocal fashion.

Only the Liberal Democrats are campaigning at full volume. They have taken Teresa May at her word that this is an election about the Brexit negotiations and are the only party campaigning to remain within the EU’s single market, a very soft form of Brexit. They thought this would open up the possibility of gaining votes from the 48% who voted to stay in the EU, but current polling suggests that half of those now feel that the decision has been made and should be respected. The Liberal Democrats position is not gaining much traction with the electorate.

Maybe the excitement in British politics over the last three years is now over. A dull campaign looks likely to lead to a large Conservative majority as Britain enters the long and tortuous Brexit negotiations. No doubt a normal service will be resumed after it becomes clearer just what Britain will look like post-Brexit.

2015 – a double election year?

2015 looks set to be a particularly political year, with the possibility of there being two general elections looking increasingly plausible. In the last six months, the strong performance of UKIP in the European elections and the SNP in the referendum vote, have seen UK politics move from the three party affair thrown up by the 2010 election (itself a radical departure from the two party politics naturally favoured by a first-past-the post system) to one where the fortunes of five different parties need to be considered to determine the final outcome of the 2015 election. One could add the Green party as a sixth, given their existing one seat and recent improvement in the polls.

In a constituency system with just one vote, a candidate merely needs more votes than any other candidate, and does not need the support anything close to half the electorate to win. In a 4-way competition, just 25.1% could theoretically be sufficient to win the seat. Thus the impact of new parties drawing votes from existing parties can make predicting the winner of any individual constituency incredibly difficult.

UKIP are currently showing at 17% in the opinion polls, with their support being drawn approximately ¾ from former Conservative voters and ¼ from former Labour voters. This could be enough to win a handful of seats, but the more important national impact could be the split in the Conservative vote allowing Labour to win some individual constituencies where they would not otherwise expect to have sufficient support.

The interest and passion displayed by the Scottish electorate in the independence referendum has continued since then and the SNP has in recent polls been drawing huge support from former Labour voters in Scotland, where Labour currently holds 41 seats, which are now under threat.

Support for the Liberal Democrats collapsed from the 26% achieved in 2010, from the moment they reversed stance on student fees in the initial Coalition Agreement. Their 7% showing currently in the opinion polls is very poor but their MPs tend to have built large local support bases in their constituencies and they are likely to win more seats than their national support would suggest.

The two major parties have not between them garnered the support of more than 2/3 of the electorate since the last election campaign (in 1945 they took 95% of the vote, but have been in decline since then). The current distribution of constituencies favours Labour, who hold many inner city constituencies where the size of the electorate has shrunk over the years, whereas Conservative constituencies are more concentrated in the suburbs where electorates have been rising.  Until recently, most analysts believed that Labour could win a parliamentary majority with just 35% of the national vote, whereas the Conservatives needed to win about 40%.  The recent rise of UKIP and the SNP probably means that these estimates need to be increased.

On current YouGov forecasts, not only will neither Conservatives nor Labour win a majority of seats, a coalition of either party with the Liberal Democrats will also not produce a parliamentary majority. The most likely outcome of the May 2015 election is thus a second election in October/November next year.

Opinion polls do fluctuate and there are still almost six months until the poll that matters, but the electoral arithmetic against a stable outcome looks difficult to overcome. For UK financial markets this may be troublesome in 2015.  This was always likely to be the case as a Conservative-led government would be committed to holding a referendum on EU membership in 2017, which would generate huge uncertainty in the minds of business with regard to investment in the UK, whilst a Labour-led government would be led by Ed Miliband, who would be seen as the most left-wing and anti-business Prime Minister that the UK has seen.

It is difficult to work out what a good election outcome would be for the financial markets.