The Conservatives have put the economy at the heart of their election strategy in the belief that it would give them a decisive lead over Labour.
This approach will still be justified if there is a swing to the Tories in the last 10 days of the campaign. But so far, despite zero inflation, falling unemployment and rising consumer confidence, David Cameron has yet to reap a significant “growth dividend”.
Simon Ward, chief economist at Henderson Global Investors, provides a possible explanation. He notes in a recent blog that there are examples of previous elections – 1979 and 1997 – when the governing party lost even though consumer confidence was high.
Inflation and unemployment do matter, he adds, but not nearly as much as what’s happening to pay packets. For every one percentage point fall in inflation or in unemployment, the poll gap moves by a similar amount. For every one point rise in average earnings, the poll gap moves by four points.
Ward says that if earnings growth was 3.5% – the Bank of England forecast for later this year – rather than below 2%, the Conservatives could expect to have a lead of six percentage points in the polls. That would be enough to give them an overall majority.
Noting that Tory-supporting businesses are said to be unhappy about the lack of traction in the party’s campaign, Ward notes wrily: “Have they considered the impact of their own wage policies on the electoral arithmetic?”