What price a pre-2015 election?

What price a pre-2015 election?

Is this the week we find out just how strong the coalition is?

Back in May, it all looked so easy, relaxed and natural. Cameron and Clegg joking at the press conference in the Number Ten garden, negotiations concluded smoothly between the parties, ministers working together round the cabinet table and so on. This week, it was a lot harder, with Lib Dem MP’s voting for huge rises in tuition fees and Tory MP’s voting for the UK’s contribution to the EU budget and for a referendum on the voting system. Next week it gets a lot harder again.

The first half of the week in the Commons will be dominated by more debate and voting on Clegg’s mega-reform bill. In and amongst, we get Cameron making the Strategic Defence review on Tuesday and then Osborne’s Spending Review on Wednesday. There are any number of government decisions that could spark backbench anger and revolts in that lot.

What ties them all together is the Coalition Agreement, which underlies the whole basis of the government. Given the possibility for trouble, this then might be a good time to look at the market for when the next General Election will be held.

The published plan is that the date of the next election will be 7 May 2015. That will be reinforced by the Fixed-Term Parliaments Act, once it’s passed. If it’s passed. Assuming it is, dissolving parliament early will become quite difficult. Labour would have a block on a voluntary dissolution (which it’s proposed would require a two-thirds majority), though not on an election prompted by a vote of no confidence if no other government could then be formed.

There are therefore three scenarios: the bill fails, the government collapses before 2015, or it lasts the course.

The likelihood of the bill failing has to be minimal. There was little opposition to it at second reading and it forms a part of the Coalition Agreement – were it to fall, the government might well go with it. Ladbrokes is offering 50/1 on an election this year. It’s well in excess of other bookies but still not value.

Of more interest might be the 9/2 available from Hills, VC and Bet365 for an election next year. So far, government action has been mostly announcements; by next year, those decisions will be making real impacts on voters’ lives. They’ve already punched a big hole in the Lib Dems’ polling figures and by next year, there’ll be even more pressure from the electorate on MP’s from the governing parties.

There’s also the AV referendum, which if it results in no change may cause some Lib Dems to question whether all the ‘Tory’ cuts are worthwhile. That said, for them to cut losses and bring down the government in the midst of continued unpopularity would be an act of political suicide for many. (If it’s a vote for change, a lot of Tories might be similarly disheartened but there’d be little they could do about it without looking thoroughly undemocratic). Still, politics is an emotional business and despair, frustration, anger and indignation all play a part. Coalitions have fallen apart in any number of countries over specific issue when one side is asked to accept too much. Most of that asking will take place in the next 12 months (not least, next week), perhaps crucially, before the Fixed Term Parliaments bill becomes law.

2012 and 2013 are best-priced at 7/1 (VC) and 11/2 (various) respectively and that doesn’t look value to me. The former is the Olympic year and probably the Queen’s Diamond Jubilee; both are likely to be when the effect of the deficit-reduction programme is at its height. In addition, the new constituencies will be being drawn up and parties will be waiting to select on that basis. A snap election on the old boundaries would throw everyone into a campaign unprepared.

The following year, 2014, is being offered at a superficially attractive 5/1 by Ladbrokes. However, it would still require an early dissolution and that means a vote of no confidence. In a hung parliament, that’s far from impossible, especially if the government is still unpopular and either the Lib Dems or Tory backbenchers are looking to distance themselves from it. Again though, to prompt an election in such circumstances would lead to quite a few cutting their own careers short, especially if they hadn’t been successful finding a seat on the new boundaries.

Which leaves 2015 at 13/8 with VC and Bet365. The problems are that it’s a long way off, there’s a great deal of water to flow under the bridge and it’s not inflation-proofed. The odds will also probably lengthen every time there’s an immediate crisis so today isn’t a good time to take it. However, there’s some value there as I’d give the government a more than 40% chance of making it through. One of my own Golden Rules for political betting is that “things usually don’t happen as much as markets and media expect”. 2015 is the default ‘things not happening’ position.

One other market worth considering is Sporting Index’s, where points are awarded for the year the election is called for, ranging from zero for 2010 to fifty for 2015. At present, only a 2015 election would return a profit for a ‘buy’, with a neutral outcome for 2014; a ‘sell’ would need an election in 2013 or earlier.

It’s said that markets operate on greed and fear. To an extent, so do political calculations: fear of losing seats and office, and greed (or more accurately, desire), for those things – for ideals without the means to implement them are but voices in the wind. This week, MP’s will be asked to vote for things they don’t really believe in to preserve their position to implement things they do want, and to court short-term unpopularity in the hope of longer-term respect and trust. Both requests will raise complex, conflicting and potentially intense feelings and could put the coalition under the greatest strain it‘s faced so far. We should get a much better idea within the next seven days of this parliament’s likely longevity.

David Herdson


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