Midterm blues for Miliband as recovery gathers pace
(c) 2013, Bloomberg News.
LONDON — Ed Miliband returned from vacation this week to find his opposition Labour Party in a fractious mood, raising questions about worsening poll figures as better economic data boosted Prime Minister David Cameron.
Some of Miliband's lawmakers have broken ranks in the past two weeks to attack what one called an "almost deafening silence" from Labour spokespeople, which allowed Cameron and his deputy, Nick Clegg, to dominate the airwaves. With the next election 21 months away, they're increasingly concerned Labour isn't doing enough to ensure a parliamentary majority.
The government's case that its austerity program is working has been bolstered by accelerating economic growth, a revival in the housing market and improving consumer confidence, undercutting Labour's argument that spending cuts are hampering a recovery. The improved data have led investors to increase bets that Bank of England Governor Mark Carney will raise interest rates sooner than he's indicated. Ten-year gilt yields are at their highest relative to German bunds for more than three years.
"Opposition leaders are not supposed to have midterm blues, which is a reflection of how lackluster Miliband's performance has been," Andrew Hawkins, the chairman of polling company ComRes Ltd., said in a telephone interview on Aug. 12. "Labour doesn't appear to have the self-belief that an opposition party should have two years away from an election."
Labour lawmaker Graham Stringer, who used the term "deafening silence" in media interviews over the weekend, said he wasn't clear what the party's policies were in key areas such as housing, welfare or education.
George Mudie was the first Labour lawmaker to speak out, saying Aug. 1 that the party is "slightly hesitant and confused." On Aug. 10, the party's health spokesman, Andy Burnham, became the most senior figure to voice concern, saying Labour has until early next year to spell out its ideas in a way that "captures how people are feeling and thinking."
Labour's immigration spokesman, Chris Bryant, drew accusations of incompetence two days ago when he had to rewrite a speech to remove criticism of retailers Tesco Plc and Next Plc for using foreign workers.
In February, polls showed Labour with a lead of as much as 15 percentage points over Cameron's Tories. That's narrowed to as little as three points this month.
In a boost to the Tories on Tuesday, an ICM Research Ltd. poll for the Guardian newspaper showed 40 percent of voters believe Cameron and Chancellor of the Exchequer George Osborne are more capable of managing the economy than Labour, up from 28 percent in June. In the survey of 1,001 voters conducted Aug. 9- 11, Labour had a three-point lead in terms of voting intention over the Tories with 35 percent to 32 percent.
Labour has struggled to decide whether it should accept the coalition's austerity program, which have seen about 400,000 public-sector jobs cut and welfare benefits capped, according to Mark Wickham-Jones, professor of politics at Bristol University.
"Labour is in a tricky position," Wickham-Jones said. "They either just accept the cuts and then they are not in a good position to beat the Tories, or they reject the cuts and they can be painted as deficit deniers."
Another Labour lawmaker, Geraint Davies, said Miliband had yet to make a "compelling case" for voting Labour, and pointed out that Cameron's party has been relentless in asserting that the previous Labour government is responsible for the state of the economy.
"Not rebutting this charge makes us look like a shamefaced schoolboy admitting responsibility by omission," Davies wrote in the Independent newspaper last week. "If we don't rebut the accusation, it will simply amplify as the election approaches."
Labour has adjusted its strategy as the economy has shown signs of strengthening, with indexes of manufacturing, services and construction all improving in July and exports rising to a record in the second quarter. Figures published today showed employment climbed to a record 29.8 million in the second quarter, while the number of people claiming jobless benefits fell by 29,200 in July, twice as much as economists predicted.
Traders are betting an increase in the Bank of England's benchmark rate, currently a record low 0.5 percent, will come in June 2015 with a strong possibility of a move as early as March of that year, according to money market data compiled by Royal Bank of Scotland Group Plc. Carney says the central bank doesn't expect joblessness, which remained at 7.8 percent in the second quarter, to fall far enough to allow a rate increase before the end of 2016.
The 10-year gilt yield rose to 2.64 percent Wednesday, the highest level since October 2011. The extra yield investors demand to hold the security instead of similar-maturity German bunds widened to 80.5 basis points, the widest since June 2010.
The pound has risen 1 percent against a basket of nine developed-market currencies in the past month, according to Bloomberg Correlation-Weighted Indexes. The dollar dropped 1.7 percent and the euro declined 0.2 percent. Credit-default swaps on British government debt fell 18 percent, the third-biggest drop after Belgium and the Netherlands among Group of 10 countries.
Labour's spokespeople are now focusing on inflation as Britons experience what is the most prolonged squeeze on living standards in more than 50 years, according to data from the Institute for Fiscal Studies.
While economic growth accelerated to 0.6 percent in the second quarter, prices are rising more quickly than wages. Inflation figures on Tuesday showed an annual 3.1 percent increase in the retail-price index in July, meaning commuters will be hit with an average 4.1 percent rise in regulated rail fares next year. Average weekly earnings excluding bonus payments were up just 1.1 percent in the second quarter.
Labour lawmakers should take heart from another polling indicator, according to Hawkins of ComRes, who points to the party's average vote share of 38 percent in the last 12 months. That would be enough to secure a majority in 2015 because of the way Labour and Tory voters are distributed in electoral districts throughout Britain, he said.
"The reality is that the electoral system is biased in Labour's favor," Hawkins said. "The Tories need to be seven percent ahead of Labour to gain a majority of just one seat."
Miliband needs to focus on winning back his party's support at next month's annual conference in Brighton, Wickham-Jones said.
"With the exception of Burnham, most of the dissent around Ed Miliband's leadership is from unimportant figures who are voicing their own agendas," he said in a telephone interview. "If I was Miliband I would be firing off some pretty stroppy e- mails to those figures and preparing for my conference speech."