Henry G Manson on Ed and Dave’s big gambles

These last few months have witnessed David Cameron and Ed Miliband place a sizeable political wager against each other, with the keys to Downing Street at stake. The Conservative leader believes the economy will show positive signs of recovery by 2015 and enough indication that the government has made good on its promise to repair the economy. The Labour leader on the other hand is gambling that even with 6 more quarters of economic growth, not enough people will feel the benefit and in fact things could still feel worse for them and their families.

Instinctively you might think that it’s the Labour leader who is taking the biggest risk. But some of the deepseated problems in the economy mean that it’s not functioning in the same way as in previous recoveries.

It seems likely that people will continue to experience a decline in living standards even with modest growth. Labour are highlighting how 39 out of 40 months under the Coalition government wages have fallen in real terms compared to prices and I wouldn’t bet against that bleak run continuing for some time yet.  

Somewhat surprisingly the Conservatives still don’t have a policy on energy that stands up to Labour’s. Many bills are expected to continue to rise ahead of inflation.  Up to half of the government’s cuts for this parliament are still to take place. Meanwhile he growth of minimum wage jobs, zero hour contracts, part-time work when wanting full-time hours might be enough to drag unemployment figures down, but they’re hardly a return to the good times for those concerned.

There could be a revival in the housing market (that goes beyond Russian oligarchs buying up London real estate) but Mike has already highlighted how an increase in house prices could cause more voter disapproval than approval. So what exactly will it take for the majority of the public around the country to feel better off? And do the Conservatives still have time to deliver it in the next 18 months?

Possibly the most dangerous scenario is for Conservative ministers to be explaining how things are indeed better while they’re going downhill for many individuals. This is why Labour’s charges of being ‘out of touch’ could really land home. GDP figures simply won’t win votes on their own.

Of the two I currently believe Ed Miliband has the value bet, but David Cameron is the one in power and still has a window of opportunity to actually do something. His party isn’t predisposed to market intervention but I really don’t believe the Conservatives can afford to risk a ‘steady as you go’ Autumn Statement.

Henry G Manson