The Political Economy of Labour Support

1997-2005   

David SandersDepartment of Government

University of Essex, UK

1. The objective economy, economic perceptions and political preferences, 1974-2005

2. A decline in economic voting under New Labour?

3. Rival ‘political’ and ‘economic’ models of party support 1997-2005

4. Empirical results

Four Sections:

1. The Objective Economy, the Subjective

Economy and Governing Party Support

A model that worked in the 1980 and 1990s:

Interest Rates Personal Expectations Government Support

Govt = a + b1Govt-1 + b2dPexpt-1 + bkEvents + ut

Pexpt = a + b1Pexpt-1 + b2dInterestRatet + bkEvents + ut

A mixed ‘political business cycle’/economic voting model

Economic Expectations and (Poll-of-Polls) Governing Party Support, 1974-2005

GOV

PERSEXP

Months

20

30

40

50

60

1974M1 1981M7 1989M1 1996M7 2004M11977M10 1985M4 1992M10 2000M4

Models of Governing Party Support, 1974 -2005

Clear role for lagged changes in Expectations; none for the objective economy

OLS Estimation AR(1) Estimation OLS Estimation

Govt Supportt-1 .94** (.02) .96** (.01) .94** (.02) Nov 1976 dummy -5.41* (2.24) -5.48* (2.23) -5.48* (2.46) May 1982 dummy 8.74** (2.34) 9.08** (2.31) 8.89** (2.37) June 1982 dummy 5.27* (2.34) 4.71* (2.31) 5.15* (2.37) June 1997 dummy 25.84** (2.35) 26.24** (2.27) 25.08** (2.37) dExpectationst-1 .05* (.02) .07** (.02) .05* (.02) dUnemploymentt .25 (.91) dUnemploymentt-1 -1.03 (.93) dInflationt .05 (.21) dInflationt-1 .05 (.20) dInterest Ratest -.15 (.21) dinterest Ratest-1 -.11 (.22) Constant 2.21** (.65) 1.53** (.56) 2.18** (.66) Ctd R2 .90 .90 .90 Durbin-Watson 2.34 1.99 2.35 LM Chisquared 39.79 [.00] Ut-1 -.20 [.00] 40.49 [.00] Reset 2.76 [.10] 3.74 [.05] Akaike IC -850 -843 -855 N 373 373 373 Sample 1974m3 – 2005m3 1974m3 – 2005m3 1974m3 – 2005m3

Modelling Aggregate Personal Economic Expectations, 1974- 2005: the impact of changes in interest rates

Clear role for (changes in) Interest Rates over 30-year period

OLS Estimation AR(1) Estimation

Personal Expectationst-1 .86** (.03) .91** (.02) June 1983 dummy 11.10* (5.08) 10.86* (5.13) March 1990 dummy -16.30** (5.37) -15.36** (5.10) Change in Interest Ratest -1.17** (.47) -1.26** (.43) Constant -.89** (.32) -.55* (.27) Corrected R2 .74 .74 Durbin Watson 2.36 1.97 Akaike -1161 -1150 LM(12) chisquared 21.96 [.04] Ut-1 -.23 [.00] Reset 1.41 [.24] N 374 374 Sample 1974m2 – 2005m3 1974m2 – 2005m3

A decline in economic voting under New Labour?

(a) Change in the political business cycle component:

• An immediate decline in New Labour’s ability to manipulate interest rates in line with the electoral cycle – ceding of interest rate control to the Bank of England

• Manipulation of taxation burden as substitute?

Changes in Taxation Index, 1997-2005

TAX

Months

-0.5

-1.0

-1.5

0.0

0.5

1.0

1997M6 1998M4 1999M2 1999M122000M10 2001M8 2002M6 2003M4 2004M2 2004M12

Taxation index constructed by subtracting RPI from Tax and Price Index

A decline in economic voting under New Labour?

(b) Economic success breeds complacency about the economy?

Percent Unemployed

Percent Inflation

Interest Rates

Economy most important issue

1974m3 – 1979m5 5.1 15.8 10.5 71% 1979m6 – 1983m5 7.6 12.6 13.6 77% 1983m6 – 1987m5 11.1 4.7 10.6 77% 1987m6 – 1992m4 7.5 6.5 12.1 49% 1992m5 – 1997m5 8.7 2.6 6.4 57% 1997m6 – 2001m5 4.1 2.7 6.2 17% 2001m6 – 2005m3 2.9 2.4 4.2 9%

Success breeds complacency?The declining salience of economic issues

UNIMP

INFIMP

OTHEC

Months

0

20

40

60

80

100

1974M1 1977M5 1980M9 1984M1 1987M5 1990M9 1994M1 1997M5 2000M9 2004M1 2005M3

Success breeds complacency?The declining salience of economic issues

ECIMP

Months

0

20

40

60

80

100

1974M1 1977M5 1980M9 1984M1 1987M5 1990M9 1994M1 1997M5 2000M9 2004M1

Success breeds complacency?Governing party support and expectations

weighted by salience, 1974-2005

GOV

PEXPECIM

Months

20

30

40

50

60

1974M1 1977M5 1980M9 1984M1 1987M5 1990M9 1994M1 1997M5 2000M9 2004M1

Fit is stronger until mid 1990s; then even weaker

3. Alternative Models of Party Support, 1997-2005

CON

LAB

LIB

Months

10

20

30

40

50

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

2005M3

The dependent variables….

Why the objective economy doesn’t matter: an illustration

LAB

UNEMPLOY

Months

30

35

40

45

50

55

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

Labour support and Unemployment: a positive trend relationship in which both trend down

Core ‘Political’ Model

Labt = b0 + b1Labt-1 + b2Costs of Ruling

+ b3Honeymoon + b4Sep2000

+ b5Oct2001 + b6Occupation + ut [3a]

Costs of Ruling = time trend (-), Honeymoon (+);

Fuel Crisis (-); 9/11 bounce (+); Iraq War and

Occupation (-)

Additions to Core Political Model[3b] Valence short-cut: Blair’s leader ratings

[3c] Government honesty and trustworthiness

[3d] Service delivery on health and education

[3e] Aggregate Personal Expectations

[3f] Labour versus Conservative economic management capabilities

[3g] Blair’s ratings plus economic expectations

Labour Support and Blair’s ratings as PM

LAB

BLAIR

Months

20

30

40

50

60

70

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

2005M3

Labour Support and Government Honesty

LAB

GOVHONST

Months

30

35

40

45

50

55

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

Labour Support and Service Delivery on Educations and NHS

LAB

SERVICES

Months

30

35

40

45

50

55

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

2005M3

Labour Support and Aggregate Personal Economic Expectations

LAB

PERSEXP

Months

30

35

40

45

50

55

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

2005M3

Expectations scale adjusted to Labour Support scale

Labour Support and Labour versus Conservative Economic Management Competence Perceptions

LAB

LABMANAGE

Months

30

35

40

45

50

55

60

1997M6 1999M2 2000M10 2002M6 2004M21998M4 1999M12 2001M8 2003M4 2004M12

2005M3

Economic Management scale adjusted to Labour Support scale

4. Empirical Results: Labour Core Blair GovHon Services Pexp Labm BlairPex

Labourt-1 .32** .23** .32** .38** .31** .10 .22** Hon 1997 4.14** 4.58** 4.09** 3.48** 4.53** Sept 2000 -10.77** -8.80** -8.98** -10.70** -10.50** -7.82** -8.53** Oct 2001 6.22** 5.69** 5.01** 5.90** 6.32** 3.94** 5.80** CostRule -.10** -.05** -.06** -.09* -.11** -.11** -.05** War -2.34** -2.65** -2.02** -2.02 -1.59* -.55 1.89** Blairt .19** .18** GovHont .07* Servicest -.05 Expectt .07* .07** EcMant .21** Constant 64.67** 41.28** 50.85** 55.53** 67.52** 74.03** 44.17** Adj R2 .92 .93 .91 .83 .92 .94 .94 Akaike -194 -186 -174 -201 -190 -175 -182 LM (12) [.14] [.02] [.19] [.47] [.24] [.09] [.12] RESET [.68] [.23] [.03] [.10] [.90] [.68] [.42] N 94 94 87 56 94 94 94 Sample begin/end

1997m6 2005m3

1997m6 2005m3

1998m1 2005m3

2000m7 2005m2

1997m6 2005m3

1997m6 2005m3

1997m6 2005m3

All the models work, except for Services; Labm has odd dynamics

Empirical Results: Conservative and Liberal Democrat Conservative

version of [3g] Model

Reduced form Cons Model

LibDem version of [3g] Model

Reduced form LibDem Model

Cons Support t-1 .36** (.08) .40** (.08) LibDem Supportt-1 .31** (.10) .33** (.09) Honeymoon 1997 -3.15** (.76) -2.46** (.73) -.21 (.83) September 2000 4.46** (1.40) 4.91** (1.35) 2.39 (1.56) October 2001 -2.10 (1.46) -1.94 (1.64) Cost/Benefit Ruling .03 (.02) .06** (.02) .06** (.01) Occupation .97 (.59) -.04 (.65) Blair PM ratingt -.15** (.04) -.10** (.02) -.03 (.04) PersonExpectationst -.01 (.02) -.06** (.02) -.06** (.02) Constant 37.7**(8.23) 23.0** (3.08) -4.7 (7.88) -9.2**(2.40) Adjusted R2 .76 .74 .76 .76 Durbin Watson 1.78 1.73 1.98 1.98 Akaike -171 -172 -181 -180 LM (12) chisquare 13.85 [.31] 16.31 [.18] 7.46 [.83] 7.46 [.83] RESET .00 [.99] 1.04 [.31] 1.39 [.24] .02 [.90] N 94 94 94 94 Sample 1997m6 – 2005m3

ConclusionsLabour Support affected by:• Costs of ruling• Blair’s rating as PM• Personal economic expectations• Honeymoon, 2000 fuel crisis, 9/11 bounce• Iraq War/Occupation (cost 2.5 points)

Conservative Support affected by:• Blair’s ratings as PM• Honeymoon, 2000 fuel crisis

Liberal Democrat Support affected by:• Costs of Ruling, • Personal economic expectations

Forecasts of Labour Support, December 2004

Blair ratings fall to 25%

Blair ratings remain at 31%

Blair ratings rise to 37%

Blair ratings rise to 44%

War Effect Continues Expectations rise to 0

35 36 37 38

Expectations rise to +5

35 36 37 39

Expectations rise to +10

35 37 38 39

War effect fades to 0 Expectations rise to 0

37 38 39 41

Expectations rise to +5

37 39 40 41

Expectations rise to +10

38 39 40 42

Forecasts of Con and LibDem vote share

Forecasts of Conservative Support for May/June 2005 Blair ratings

fall to 25% Blair ratings remain at 31%

Blair ratings rise to 37%

Blair ratings rise to 44%

War effect continues

34 33 31 30

War effect fades

32 31 30 28

No expectations effect on Conservative support.

Forecasts of Liberal Democrat Support for May/June 2005 Expectations rise to 0

23

Expectations rise to +5

22

Expectations rise to +10

22

No war effect or Blair effect on Liberal Democrat support.

Long term PM ratings/Expectations Model of Governing Party Support, 1974-2005

Coefficient St err Governing Party Supportt-1 .98** 0.01 Change in PM Approval/Ratingt .25** 0.02 Change in Aggregate Expectationst-1 .05** 0.02 November 1976 dummy -4.70* 2.00 May 1982 dummy 7.84** 1.90 June 1997 dummy 26.21** 2.03 Constant .82 0.45 Corrected R2 .92 Akaike Information Criterion -815 Ut-1 -.30 N=373. Sample: 1974m3 – 2005m3