25 Nov 2019

General Election 2019: 17 days to go

Phil Shaw

Investec Chief Economist

In this week's General Election wrap, Investec Chief Economist Phil Shaw takes a look at the main events of last week, most notably the publication of the parties' manifestos.

Last week saw the launch of the main parties' manifestos. Labour launched a blockbuster on Thursday. This included a pledge to raise day-to-day spending by £83bn per annum by 2023/24, which the party claims will be funded by the top 5% of income earners, the corporate sector and a financial transaction tax. Also, Labour’s proposals include a commitment to an additional £55bn of investment, funded by higher borrowing.

 

Furthermore, it intends to freeze the state pension age at 66 and to nationalise the large energy and water companies, the railway and Royal Mail. These policies are not formally costed. Lastly, at the weekend, Jeremy Corbyn promised to recompense women whose retirement ages were raised from 60 to 66 from the mid-1990s onwards (the so-called WASPI women). This would also count as additional expenditure. 

 

The Tory manifesto launch

By contrast, yesterday’s Tory manifesto launch was a subdued affair, and very light on contentious policy surprises, taking few risks in alienating the electorate. Some commentators have labelled this a ‘health and safety’ policy agenda. The Conservatives have learnt the lesson from 2017 when the media rounded on several of their proposals, especially on social care. The Tories continue to persist with Brexit to remaining at the heart of their campaign messaging. Indeed their manifesto promised to begin parliamentary Brexit votes before Christmas to enable the UK to leave the EU by the (latest) deadline of 31 January next year. It also included a promise not to increase income tax, national insurance or VAT, alongside a commitment to raise the number of nurses by 50k.

 

Neither of the two TV leaders’ debates (Tuesday and Friday) seemed to result in a clear winner. Interestingly though, during the session with the four leaders on Friday, Jeremy Corbyn revealed that his position in any second EU referendum would be agnostic. This, of course, is if his party wins the election and holds a vote on a renegotiated deal.

 

Will the Conservatives' strategy work?

The Conservatives’ strategy seems to centre on promoting their Brexit policy and attacking Labour. This does seem to be working as average polls now estimate their lead over Labour to be 14% (43% v 29%), up from 9-10% a week ago. Meanwhile, the recent Liberal Democrat drift appears to have stabilised at 15%. We have of course warned over shifting party allegiances and the difficulties in translating voting shares into seats.

 

But on a lead of this scale, it would be difficult to see anything other than Boris Johnson returning to 10 Downing Street with an overall majority. Indeed a poll by Survation in Great Grimsby, a seat held by Labour since 1945, showed the Tories winning here with a 10% swing from Labour. This suggests strongly that the Conservatives are set to capture a number of Labour seats in areas that voted to leave the EU in 2016. This seems especially so in the Midlands, the North West and Wales. 

 

What are the odds?

Bookmakers’ odds show Mr Johnson’s party 4/9 to win an overall majority on 12 December. Betting prices have not been a reliable guide to the outturn of recent political events. Even so, it does seem as though this election is the Conservatives’ to lose.