J.K.Galbraith liked to remark that “the only function of economic forecasting is to make astrology look respectable.” One could say the same of political predictions. But with that warning duly noted, here are five of mine for 2014.
1. Labour will end the year ahead in the polls
The polls will remain tight as the Tories continue to benefit (however undeservedly) from the economic recovery, but Labour will end the year in front. The proportion of 2010 Lib Dem voters supporting Miliband’s party and the proportion of 2010 Conservative voters supporting UKIP will remain too great for the Tories to move ahead. As May 2015 approaches, discussion will increasingly focus on whether Labour will win an overall majority or, alternatively, become the single largest party, with many Tory MPs resigning themselves to defeat.
End of year polling averages:
Labour 38%
Conservatives 33%
UKIP 15%
Lib Dems 10%
2. Scotland will reject independence by a double-digit margin
The No campaign retained a comfortable lead throughout this year and that won’t change in 2014. On 18 September, Scotland will reject independence by a margin no smaller than 10 points and conceivably as large as 25. The pessimists in the Unionist camp and the optimists on the nationalist side point to three factors that could work in the SNP’s favour: the large number of undecided voters, Alex Salmond’s strength as a campaigner and the unpredictability of referendums. But none of these suggests a yes vote is likely.
There is no reason to believe that the quarter of Scots yet to decide how they will vote will break for the nationalists in the number required for victory. Indeed, according to the most recent YouGov poll, which put the No side ahead by 52-33, even winning over 100 per cent would still leave the Yes camp four points behind.
The SNP might have overturned a double-digit Labour lead to triumph in the 2011 Scottish parliamentary elections, but there was at least something close to a precedent for this in the form of the party’s 2007 victory. By contrast, there has never been anything close to a majority for independence and the uncertainty created by the financial crisis and its aftermath has made voters even more reluctant to take that leap into the dark.
There have been polls showing that Scots would vote for independence if they believed it would make them better off, but the problem for Salmond is that they don’t. Asked earlier this month by YouGov, “Do you think Scotland would be economically better or worse off if it became an independent country, or would it make no difference?” (the defining issue of the campaign), just 26% said “better off” and 48% said “worse off”. If Salmond couldn’t persuade voters that Scotland would be better off alone when the UK was in an austerity-induced double-dip recession, he’s not going to be able to persuade them now.
Referendums are uncertain beasts, but the clear tendency is for support for the status quo to increase as voting day approaches (as in the case of the 1975 EU referendum, the 2011 AV referendum and the 1980 Quebec referendum). Faced with the real possibility of secession, I expect a significant minority of Yes supporters to reverse their stance. Ed Miliband, who would struggle to govern if Labour was stripped of its Scottish MPs, and David Cameron, who would become known as the prime minister who lost the Union, will unite in relief.
3. Unemployment will fall to 7% but the Bank of England won’t raise rates
Back in August, when Mark Carney introduced forward guidance, the Bank of England didn’t expect unemployment to fall to 7% until 2016 (it then stood at 7.8%). But with joblessness already down to 7.4%, my prediction is that the 7% threshold, the trigger for the Bank to consider a rate rise, will be reached by the end of the year.
At this point, hawkish economists will demand an increase in the base rate, but Carney will reject their advice. The governor will cite the continuing weakness of household finances, with many trapped in low-paid work, as the main reason to maintain monetary stimulus and hold rates at their record low of 0.5%.
4. Labour will win the European elections
There is a consensus among the media that UKIP will triumph in the European elections as Nigel Farage turns them into a referendum on Romanian and Bulgarian immigration, but my prediction is a narrow Labour win. The most recent poll gave Miliband’s party a seven-point lead over UKIP (32-25) and while this will decline as the campaign proper begins, they will retain the advantage. Quite simply, there are too many voters whose default setting is to back Labour (the elections will be held on 22 May, the same day as the locals) for Farage to win in a national contest. The Tories will finish in third place (prompting predictable panic among their backbenchers), with the Lib Dems in fourth and the Greens in fifth.
5. Ed Balls will remain shadow chancellor
Ed Miliband has stated several times, most recently last week, that Labour will go into the general election with Ed Balls as shadow chancellor, but this won’t stop Fleet Street commentators speculating that he will be moved. The cries for Balls to be thrown overboard will reach a crescendo as Alistair Darling leads the Unionist side to victory in the Scottish independence referendum (see prediction number two), just days before the Labour conference opens, but Miliband will wisely disregard them.
The appointment of the man who was Chancellor at the time of the financial crisis would be a gift to the Tories and Balls’s rare combination of political cunning and economic nous means he remains the best qualified individual for the job. As 2014 draws to a close, the shadow chancellor will, after years of waiting, finally be able to look forward to delivering his first Budget.
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