EU Referendum: The Choice

I’m pretty sure I’m at risk of breaking a cardinal rule of blogging here. That is: to confuse what this blog is about. It is supposed to be about the analysis of politics in search of betting value. However, this post is going to be different: it is about analysis of a major forthcoming political event – the EU in/out referendum – in search of a choice. And it becomes heretical by including an opinion. Well, mine to be precise.

If that makes you uncomfortable, please stop reading now.

The reason I’ve chosen to outline my thinking here is because (a) my view is that this vote is a strategic decision about the future direction of this country for all of us to very carefully consider (it may not arise again for decades) and, therefore, this vote is of supreme and unique importance, and, (b) quite frankly, there was nowhere else convenient I could think of to capture it.

I suppose you could add a – somewhat egotistic – (c) that it might help the few who read it, at the very least, understand the basis of my thinking, and perhaps even influence one or two in structuring theirs.

This is a long blogpost. So I’ve broken it down into eight sections:

1. What values might guide your decision?
2. How has the EU developed?
3. What is the status of the UK?
4. What were our renegotiation objectives, and what has been achieved?
5. How will the EU develop in future?
6. What does ‘Remain’ look like?
7. What does ‘Leave’ look like?
8. The Choice

Here goes.

1. What values might guide your decision?

Probably about 75-80% of you will have already made up your mind based upon your values. These can include some pretty powerful concepts like the unity of humanity, peace, self-determination, sovereignty, prosperity, tolerance, progress, and open-mindedness.

All of these are good things. However, for many of us, even those who’ve already made up their minds, some of these will be in conflict. So we have to be able to map them to a reference framework to clearly structure our decision.

I think it would be fair to outline mine at this stage:

1. Nations are still relevant – humans are social and emotional beings, and we always will be. We tend to naturally identify with social groups that share emotional attachments to land, culture, language, tradition, history and values to a sufficient extent to command our psychological loyalty. These groups used to be transient tribes in the prehistoric age; in the modern age, they are geographically bound nations. They may not be permanent, but any populace has to draw upon a continued sense of civic loyalty to allow the formation of a coherent and stable demos for consensual government. In other words, a group with which we identify with when we say “we”. Democracy requires this for there to be a meaningful engagement between voters and the government through elections.
2. Nations do not preclude international collaboration and cooperation – we all live on the same planet. We need international cooperation to address the mutual challenges we have and we should build consent to do so. However, that doesn’t mean we shouldn’t be very relaxed about national self-governance. Regulatory diversity is a good thing.
3. Democracy means accountability – that means the ability to elect, and eject, those who make our laws.
4. Sovereignty means reversibility – the ability to both implement a decision, and to reverse it.

The important point drawing these together is this: international institutions, that may be formed by treaties, should not presume they have consent to legislate on our behalf, particularly where the decisions they take may not have popular support and are practically irrevocable through the democratic process.

When this does occur, on issues of significance, it can become a big problem.

In case this all seems a bit abstract, and it is a bit, I will include a few concrete examples later to illustrate the point.

2. How has the EU developed?

This could occupy a (very) lengthy blogpost of its own. But the EU has essentially developed from the (noble) desire to reconstruct the economies of western Europe after WWII, prevent war and ensure a lasting peace.

It is probably not uncontroversial to say that the democratic experience of continental Europe prior to WWII was somewhat mixed. It some cases, democracy and plebiscites had led to fascism and war. It is also fair to say that, in the early 1950s, plenty of European countries, including Spain, Portugal and Greece, as well as all of Eastern Europe, were undemocratic, so there was, amongst many of the continent’s leaders at the time, a dream of a “Europe” that all could rally around.

This led to France, Italy, West Germany and the Benelux countries pooling their coal and steel (the two main tools of war) in the Treaty of Paris in 1951, which included the Europe declaration – the birth of Europe as a political, economic and social entity.

Since then, a number of treaties have been signed by European states. A summary of the powers granted through each is as follows:

1. The 1957 Treaty of Rome – created a customs union and the European Economic Community (EEC); a common market of goods, workers, services and capital (plus common transport and agriculture policies)
2. The 1967 Brussels Treaty – merged the judicial, legislative and administrative bodies of the European Coal and Steel Community (ECSC), European Atomic Energy Community and the EEC into a single institutional structure
3. The 1987 Single European Act – aimed to create a “Single Market”, remove barriers and increase harmonisation and competitiveness. Also codified European political cooperation (forerunner of the common foreign and security policy)
4. The 1993 Maastrict Treaty (Treaty on European Union) – created the European Union. Laid the groundwork for economic and monetary union, established the three pillars of the European Union (justice and home affairs, common foreign and security policy and the European Community). It also extended free movement of workers to the free movement of people; EU citizenship created.
5. The 1999 Amsterdam Treaty – introduced the idea of a High Representative to put a “name and a face” on EU foreign policy. Incorporated Schengen (borderless travel zone on the continent). Also two major reforms concerning ‘co-decision’ (the legislative approval procedure involving the European Parliament and the Council of the European Union). The EU became responsible for legislating on immigration, and civil law, in so far as necessary for the free movement of persons within the EU. Increased intergovernmental co-operation in policing and crime, and aim to establish an area of freedom, security and justice for its citizens.
6. The 2003 Nice Treaty – reformed the decision-making process, necessary to facilitate enlargement of the EU into Central and Eastern Europe, generally by adjusting voting weights.
7. The 2009 Lisbon Treaty – EU moved from unanimity to qualified majority voting (QMV) – I will come back to this – in at least 45 policy areas in the council of ministers, made the Union’s bill of rights (Charter of Fundamental Rights) legally binding and enforceable by the European Court of Justice, created a long-term President of the European Council, a High Representative of the EU for Common Foreign Affairs and Security Policy (CFSP), a European External Action Service (serves as a foreign ministry and diplomatic corps for the EU), foresees that the European Security and Defence Policy will lead to a common defence for the EU when the European Council resolves unanimously to do so, gave stronger powers for the European Parliament, and gave a consolidated legal personality for the EU, so the EU is able to sign international treaties in its own name.

Institutionally, the current set-up of the European Union is complex, but a summary of its (seven) main institutions is below:

• European Council – this is where the heads of government of each member state (often called “EU summits”) provide the EU with strategic political direction – it is chaired by the President of the European Council, who acts as a principal representative of the EU on the world stage. Currently, this is Donald Tusk.
• European Commission – executive body of the EU that proposes EU policy agenda, and has a monopoly on all legislation. The President of the Commission is the most powerful officeholder in the EU and responsible for enforcement of EU legislation. Currently, this is Jean-Claude Juncker.
• The Council of the European Union  – this constitutes ministers from each member state, which vary depending on the topic. It co-decides on legislation (directives and regulations) proposed by the European Commission and also budgetary matters jointly with the European Parliament through QMV
• The European Parliament – is the “first institution” of the EU and has ceremonial precedence over all authority at European level. It shares equal legislative and budgetary powers with the Council of the European Union and has equal control over the EU budget. Finally, the European Commission is accountable to Parliament. In particular, Parliament elects the President of the Commission, Jean-Claude Juncker, and approves (or rejects) the appointment of the Commission as a whole. Currently, its President is Martin Schulz
• Court of Justice of the European Union (CJEU) – oversees the uniform application and interpretation of EU law, and that the law is observed in the interpretation and application of the Treaties of the European Union
• The European Central Bank – the central bank for the euro; administers monetary policy of the eurozone
• The European Court of Auditors – audits the accounts of all EU institutions

It should be noted there are two other non-EU institutions often confused with the above: the Council of Europe, and the European Court of Human Rights (ECtHR) which is associated with it. Neither of these have anything to do with the EU, despite journalists and politicians often getting confused, except that the Lisbon Treaty incorporated the European Convention of Human Rights into the EU’s Charter of Fundamental Rights, which basically means that the CJEU can now rule on it.

The reason I post all that is to clarify the legal shape and basis of the European Union as it actually is, and the constitutional changes that have in fact already been realised.

Personally, my view (you may disagree) is that it is not too difficult to draw conclusions about whether or not the European Union has stayed on course in following the vision of its founders.

We should be clear what we are voting on.

3. What is the status of the UK?

The UK acceded to the European Economic Community (EEC) and the provisions of the Treaty of Rome through the 1972 European Communities Act. At the time (and for some time after) the EEC was referred to as the “common market”. I.e. a customs union, with no trade tariffs or customs controls on goods moving within the EU, and a common tariff wall applied to goods entering the EU from the rest of the world.

However, the EU is now more all encompassing than the customs union, including the so-called ‘four freedoms’ – the free movement of goods, services, capital and people – that were signed up to in 1972.

We have signed each and every treaty subsequent to our accession, except for the fact we have secured two definitive opt-outs:

• Schengen (we are not part of the common travel area)
• EMU (we do not have to join the euro)

In addition, we have a flexible opt-out (we can choose in or out) on justice and home affairs measure, although we usually do choose to join in, except on matters related to Schengen, and we have a “clarifying” protocol in the Lisbon Treaty on the Charter of Fundamental Rights with respect to its applicability to UK law, although it has been seriously questioned both what this means, and how strong it is.

We used to have an opt-out from the social chapter. However, this was abolished by Tony Blair in 1997.

We are subject to everything else. This includes the common market and four freedoms, and:

• Cross-border financial services
• Social and employment policy
• Energy and climate policy
• Transport
• Consumer rights
• Indirect taxation powers (VAT)
• Competition law
• Agricultural policy
• Fisheries policy
• Regional policy
• External trade policy
• Foreign policy
• Justice and home affairs
• Common Foreign and Security policy
• Common Security and Defence Policy

The EU therefore has a wide-ranging regulatory impact on the whole UK economy, from social and employment law, to environment policy, to agriculture, to regional policy, and on the UK’s net contributions to the EU budget. The ‘single market’ has aimed to develop a single regulatory regime through harmonisation of a common set of technical standards under the jurisdiction of the CJEU, although free movement of goods and people are ‘freer’ than capital and services.

The EU also has a growing role in justice, home affairs and human rights, now under jurisdiction of the CJEU as well.

On foreign policy, article 34 of Lisbon requires us to use our permanent seat on the UN security council to coordinate our action with the EU, to defend its position and interests, and request that the High Representative be invited to present the EU position where one has been agreed. This is already causing frictions as the EU has coveted the UK seat for some time; for example, the UK Government has blocked more than 70 EU statements to the UN, insisting that statements should be presented on behalf of the “EU and its member states”, and not just “the EU”. The EU also has an expanding diplomatic service under the European External Action Service and has set up 139 delegations around the world since the passage of Lisbon.

On trade, the EU represents and negotiates on behalf of all 28 members at the World Trade Organisation (WTO) and negotiates free trade agreements on their behalf. Since the passage of Lisbon this includes investment, as well as goods and services.

I mentioned Qualified Majority Voting (QMV) earlier. This is called qualified, rather than simple, majority voting because any decision requires the support of at least 55% of Council of the European Union members, who must also represent at least 65% of the EU’s citizens. This applies to the vast majority of policy areas since the Treaty of Lisbon.

It should be noted that the 19 eurozone countries constitute a permanent qualified majority by themselves, which can outvote the UK if they choose to do so.

Recognising the significant evolution of the European Union since the last UK vote in 1975, David Cameron has had a series of renegotiation objectives since he became Conservative Party leader in 2006.

4. What were our renegotiation objectives, and what has been achieved?

David Cameron’s renegotiation position has evolved. When he ran for the leadership in 2005 his position included a demand for the repatriation of social and employment legislation. This commitment was included in the 2010 general election manifesto, which was held less than six months after the ratification of the Lisbon Treaty, as well as commitments on returning powers on the Charter of Fundamental Rights, and criminal justice.

More importantly, in 2013 he gave the “Bloomberg” speech which set out a vision for the future of the EU.

Essentially, he focussed on the eurozone, how its future might affect the single market, the challenge of EU competitiveness and the gap between the EU and its citizens. It had a number of principles: (1) competitiveness and completion of the single market, and accelerating global trade deals (2) flexibility on integration (3) that power must be able to flow back to Member States, not just away from them (4) a bigger and more significant role for national parliaments, and (5) fairness for those inside and outside the eurozone.

It also made an in/out referendum Conservative Party policy.

The 2015 manifesto promised a renegotiation on that basis, an end to ever closer union, and an in/out referendum on the EU.

David Cameron negotiated a “heads of terms agreement” with all other EU leaders in February 2016, albeit has yet to be put into a treaty, nor has it yet got past the EU parliament. The agreement is summarised here.

Essentially, it agrees the UK is not committed to ever-closer union, introduces a “red-card” to block EU regulations and directives if at least 55% of EU member state parliaments object (but this threshold is so high, it unlikely it will ever be used; for example, a “yellow card” – to delay and rethink – with a much lower threshold of 35% has only ever been used twice), a one-off seven-year temporary brake on social security benefits, indexing of child benefit to the member state the child is living in from 2020, and a reaffirmation on completing the single market in services and increasing competitiveness. On economic governance, it says the euro is not the only EU currency, with mutual respect and sincere cooperation for those who do not share it, and a right for any member state to escalate concerns about the impact of eurozone decisions for urgent discussion in the European Council.

However, there was no attempt at repatriating social or employment policy, no reform of agriculture, no opt out from Charter of Fundamental Rights, no decentralisation of regional policy, no mechanism to flow powers back to the UK parliament, no mechanism to unpick judgements of the ECJ and no reform of EU institutions; for example, double majority voting for both Eurozone and non-Eurozone countries, so a bloc eurozone vote in the Council cannot result in non-eurozone countries having EU laws imposed upon them against their wishes.

In exchange for these small concessions, the UK is now required to facilitate further deepening of EMU across the EU in future, and our veto over this has been surrendered. We have also signed up to further integration and harmonisation in services, including in energy, capital and digital technology.

Once again, we should be clear what we are voting on.

5. How will the EU develop in future?

The European Union has faced two major crises in recent years:

First is the eurozone debt crisis. This was realised during the financial crisis of 2008-2012 by a number of (already overexposed) member states being unable to repay or refinance their government debt, or bail out over-indebted banks, without external help. It revealed a structural flaw at the heart of the euro: a single currency without a fiscal union (e.g. common tax rules, including a mechanism for fiscal transfers) makes it highly vulnerable to external shocks.

Second, is a migration crisis. This has, at its root, continuing serious conflict in the middle-east, north Africa and the horn of Africa where political instability, poor economic prospects and fast growing demographics have created a desire amongst tens of millions to emigrate to Europe. This was given a huge boost by the policy decision by Germany last year to grant asylum to any Syrian refugee that reached its borders. Countries bordering the Mediterranean, such as Italy and Greece, and along the route to Germany, were unable to cope, particularly given their already economic vulnerable state, and many unilaterally reimposed border controls.

Neither of these two crises are going to go away anytime soon.

The EU has led demands for a new quota system to relocate and resettle refugees and migrants around Schengen, which is controversial, and measures to strengthen the maritime security of the EU’s external border.

The EU has also argued for a unified approach to both monetary and fiscal policy, including an increase in transfers from richer to poorer member states to make it work, in a report entitled: ‘Completing Europe’s Economic and Monetary Union’.

This was dubbed The Five Presidents’ Report (because it was written by the President of the European Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup, the President of the European Central Bank, and the President of the European Parliament)

You can read a summary here. The full report is here.

It commits the EU to the creation of a ‘genuine Economic Union’, a ‘Financial Union’, a ‘Fiscal Union’ and a ‘Political Union’ by 2025, including:

• A future euro area treasury
• A euro area system of Competitiveness Authorities
• Unified external representation for EMU (e.g. on the IMF)
• A full-time presidency of the euro-group
• A European pillar of social rights – greater integration of labour markets and welfare systems
• Certain aspects of tax policy (e.g. corporate tax base)

In addition, it includes reference to a capital markets union, which will apply to all 28 EU member states as part of completing the single market. This talks about addressing “bottlenecks” like ‘insolvency law’, ‘company law’, ‘property rights’ and strengthening cross-border risk-sharing through addressing the ‘legal enforceability of cross-border claims’. It also references common standards, greater harmonisation of accounting and auditing practices, and deepening integration of bond and equity markets.

The UK will have no veto over this. In fact, we agreed to facilitate it in the recent negotiations and, in any event, deepening completion of the single market is current HMG policy. In my view (and it is only a view) this will be set in motion rapidly following a UK Remain vote.

Longer-term, the Lisbon Treaty includes an aspiration for a common defence policy: “The common security and defence policy shall include the progressive framing of a common Union defence policy. This will lead to a common defence, when the European Council, acting unanimously, so decides.” The EU Commission views this report as a roadmap to a common defence.

The European Parliament also endorsed this report last year which “calls for the necessary negotiations, procedures and reform of the UN Security Council to be carried out to enable the EU to become a permanent member of that body, with one permanent seat and one single vote”.

The risk for the EU (not just the UK) here is that pushing integration to the extent envisaged above begins to undermine rather than strengthen pan-European solidarity. We are already seeing a demand for in/out referendums in other EU countries, with between 41 and 48 percent of respondents in Italy and France saying they would vote to leave. The steady rise in fringe parties on the Left and Right in Greece, Austria, France, The Netherlands, and Sweden is testament to this frustration.

Our votes should pay due consideration to the likely future path of evolution of the EU.

6. What does Remain look like?

In the short term, Remain looks like more of the same. We will retain one EU commissioner portfolio out of twenty eight. The UK Prime Minister will continue to attend meetings of the European Council, we will have 73 of 751 MEPs in the European Parliament, and we will retain 8.4% of the votes in the Council of the European Union.

The main argument in favour of Remain is that of having a “seat at the table”. This is both economic and political: (1) Economic – in that the UK having input into the formulation of EU regulations may reduce non-tariff barriers and increase our access to European markets (2) Political – in that the UK, having a more global foreign policy, and less protectionist trade, outlook is more likely to drag the centre of gravity of the EU towards a transatlantic position that allies with US interests and aids political alliance building; for example, in instigating sanctions against Russia and Iran.

However, there are five particular risks to the UK with a Remain vote in the medium-term, and some are already posing problems now:

(1) Under the QMV rules of the Lisbon treaty, the 19 eurozone countries now constitute a permanent majority in the Council of Ministers. As they continue to pursue their declared objective of economic, fiscal and political union their interests will increasingly converge, setting the agenda, voting as a bloc and pushing through legislation in the interests of the eurozone. This means that however many times the UK votes against proposals the eurozone will always win and have control over laws introduced here. This is already happening as George Osborne admitted in 2014. The UK Government has also been in the losing minority of votes from 2009-2015 more than four times as often as in 2004-2009, and more than twice as often as any other EU nation.

At the same time as the eurozone is converging, the UK is diverging, with the share of UK exports accounted for by the EU falling from 55% in 2002 to 44% in 2015.

It is hard not to see this divergence continuing. For example, the Economist forecasts that the Asia-Pacific region will account for 53% of the global economy (by GDP) by 2050.

(2) The EU now has a firm constitutional basis and legal identity, established, in particular, under the Lisbon Treaty. It can sign international treaties in its own right. In addition, the CJEU has the power and freedom to interpret the Treaties as it wishes. It is increasingly using the EU’s Charter of Fundamental Rights to do so; for example, with votes for prisoners in the UK.

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(3) Both the scope of the EU’s powers, once conceded by treaty, and the laws it passes are practically irrevocable – unless the UK is able to convince the whole of the EU on the former, and, usually, a qualified majority on the latter, to change them. David Cameron tried to renegotiate aspects of the Lisbon Treaty, and got nowhere.  This prevents us from being able to change laws that affect all our lives where we decide they are no longer suitable.

For example, the fundamental right of free movement of people does not reflect today’s realities. It dates from when the (then) EEC was a small group of countries with broadly similar living standards. Free movement of workers was limited and not a political issue. Today, in a vastly expanded EU of almost 500 million people, it is. The UK is the largest source of jobs in the EU, with an economy increasingly out of step with the eurozone, and speaks the global language. This poses a major migration challenge, and there is no prospect of it changing. If you desire to be part of an integrated state with a single unified economy, like the eurozone, freedom of movement still makes sense. If, however, you do not want to be a part of that integrated state it really makes no sense whatsoever.

(4) We must continue to accept that 100 per cent of our businesses – large and small – must comply with every aspect of EU regulation in trade, customs, competition, agriculture, fisheries, environment, consumer protection, transport, trans-European networks, energy, the areas of freedom, security and justice we opt-into, and new powers over culture, tourism, education and youth, and aspects of indirect taxation such as VAT.

The 21st Century is likely to include some major technological changes and scientific breakthroughs in genetic engineering, machine intelligence, robotics, mobile web services, smart technology and pharmaceuticals, many of which will occur in the UK. And some of the existing EU directives have proved positively harmful; for example, the Clinical Trials Directive that has badly delayed the testing of cancer drugs.

If we are not able to exploit these to their full through appropriate regulation both we, and the rest of the world, will lose out. 

(5) We end up voting for ‘more Europe’. In the UK, it has usually been argued that the European Union is an alliance of nation states, cooperating to achieve what they can’t achieve alone, but ultimately accountable to their own parliaments. The Remain focus on economic matters is telling, because it’s what we want the EU to be about. However, there has been a consistent pattern over the last 40 years of treaty after treaty changing the political balance of power between the member states and the EU. In the UK, we have convinced ourselves that political union isn’t really the objective, or they don’t really mean it, and then it happening regardless. We have then argued for reform – usually unsuccessfully – accepted opt-outs, which then get progressively weakened or watered down, or are surrendered by future Governments, and then replaced meaningful action with periodic symbolic flounces.

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There’s a clear body of evidence, in my view, that this will continue in future in the areas of foreign, economic, political, social and defence policy, and the EU will continue to expand with the future admission of new member states from Albania, Macedonia, Serbia, Montenegro and, potentially one day, Turkey.

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We must be honest about both the economic and the political realities: there is a continuing intent to build a country called Europe.

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The Lisbon Treaty was, in my view, a huge mistake. It amounted to a re-badged EU constitution. The rejections of that constitution by the French and Dutch electorates of that constitution in 2005 were almost totally ignored, and the smoke and mirrors that were deployed to get that treaty through – including sidestepping any UK referendum by our Government at the time – were unforgivable. If we had had such a vote, I believe we would have rejected it. Which is why we didn’t get one.

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There are respectable reasons to vote Remain. Not least of which might include the fact that the current set-up might work well for a number of businesses and industries. However, in my view, there is no such thing as a “qualified” Remain vote. A vote to Remain will be a democratic ratification and endorsement by the UK electorate of all the EU treaties signed to date on our behalf, all the changes in its legal and constitutional basis over the last 40 years, and a tacit acceptance the future direction of integration of the EU. Further, as we were given our own special negotiation, our own referendum, and have agreed to stay, there will be little scope to reopen discussions if we change our minds.

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This might be our only chance for decades.

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What you have to decide is if you think our influence will still remain meaningful, real, and if the economic benefits are worth the potential political costs, and loss of direct sovereign control, in voting Remain.

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Judge for yourselves.

7. What does Leave look like?

The short answer is: it looks like not being in the European Union. It would mean the UK regaining its position in the global pantheon of self-governing liberal democracies. It would become just like all other 163 countries in the world that are members of the United Nations, but aren’t part of the European Union.

That means cooperation and collaboration with both our European neighbours, and global allies, to build a better world, but without remaining a member of a supranational federal union that presumes to legislate for us. It absolutely does not mean isolation, “pulling up the drawbridge”, resurgent nationalism, intercontinental division or any of the other retrograde outcomes that are often ascribed to it.

The most serious disadvantage Leave has is that it is neither in office, nor is it current HM Government policy. So we simply don’t know exactly what “deal” we would get if we did Leave: one has not been negotiated yet.

All Leave can do is develop a series of negotiating positions – as they have already outlined here.

The primary objective would be to “create a new European institutional architecture that would enable all countries, whether inside or outside of the EU or euro, to trade freely and cooperate in a friendly way”.

In particular, to “negotiate a UK-EU Treaty that enables the UK to (1) continue cooperating in many areas just as now (e.g. maritime surveillance), (2) to deepen multilateral cooperation in some areas (e.g. scientific collaborations and counter-terrorism), and (3) to continue free trade with minimal bureaucracy.”

There would be four key aspirations of any renegotiation in my view:

1. Primacy of UK over EU law (control over economic regulation, justice, laws and rights)
2. Right to sign bilateral treaties with non-EU states (e.g. with India, the US and Australia)
3. Right to control who can settle in the UK (via a points systems for students, workers and refugees)
4. A new European institutional framework (one that might ultimately recognise an outer tier of a dozen – or more – self-governing European territories and states) for those that wished to join a single trade area, but not a single government

A vote to Leave would therefore be a vote for a common European free trade area, but not a common government. A vote to Leave would be a mandate for HMG to negotiate on our behalf on this basis.

Following a Leave vote, the UK would remain members of NATO and the Council of Europe, but would regain its seat on international bodies such as the World Trade Organisation. The supremacy of EU law and the CJEU would end. Economic and social issues would again be contested in national elections. Our businesses and exports would only have to comply with EU regulations to the extent they wished to export to the EU (just as we must do the same for our US or Japanese exports) but 100% of EU legislation would not apply to 100% of our economy. We could forge partnerships and trade deals across the globe; to give but one example, India is a rapidly growing market for Scottish Whisky – one of our main food exports – but still imposes 150% tariffs on UK whisky imports, because the UK still has no free trade deal with India.

A Leave vote is not a silver bullet. However, it is necessary for restoring democratic self-government. Following a Leave vote, those who made decisions would be accountable again through elections (democratic) and those decisions would also be reversible (sovereign) if they turned out to no longer command popular support.

Neither does Leave mean abandoning our European neighbours. We are a European country, and will remain one. It is in our interests for an enduring and stable political settlement amongst the nations of Europe. We will want to deepen our collaboration in some areas – like in maritime security, scientific collaboration, travel, sanitary controls, regional environmental issues, and cooperate in defence and counter-terrorism – for a better and more secure Europe.

The crucial difference is that this would be done through bilateral cooperation and collaboration and with democratic support. I think our vote to Leave will be positive for all of Europe because it will give leadership to those across the continent who are looking for a progressive future based on decentralised self-governance.

This isn’t something we can’t have. Countries like Australia, Canada, the USA, New Zealand, Switzerland, Norway and Iceland all enjoy excellent economic growth, global influence, the ability to act independently and have strong trusted security links with each other. They are also right at the top of the UN Human Development Index with excellent living standards, and high GDP per capita.

It is, in my view, a very attractive prospectus.

What would the long-term impacts of Leave be?

A vote to Leave would, by definition, involve change to the existing UK-EU relationship. And, given that there is no deal on the table at the moment, it would involve work to reach it. In the meantime, there’s a risk this drives economic uncertainty.

At the end of the day, the UK has been in a close economic union with the EU for several decades, and the business models of internationally trading UK companies have adapted to it. Until the parameters of the future UK-EU relationship are clear, there is a risk that investment, in the short-term, stalls.

However, this uncertainty can be exaggerated. I want to take a quick look at some of the economic arguments.

There have been a number of Brexit studies. These have estimated the net cost/benefit of the UK’s EU membership at anywhere between -5% and +6% of GDP, but all differed in their methodologies and assumptions about life after Brexit. Open Europe’s considered all of these and its own analysis showed “a far more realistic range is between a 0.8% permanent loss to GDP in 2030 and a 0.6% permanent gain in GDP in 2030.”

The respected economists, Capital Economics, also published a report for Woodford Investment Management in February 2016, that aimed to look at this objectively. A few extracts from its Executive Summary include:

–

• “The more extreme claims made about the costs and benefits of Brexit for the British economy are wide of the mark and lacking in evidential bases”
• “It is plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the net impacts will be modestly positive. This is a strong conclusion when compared with some studies”
• “It is highly probable that a favourable trade agreement would be reached after Brexit as there are advantages for both sides in continuing a close commercial arrangement. Contrary to the claims of many authors and commentators, it is probable that the impacts of Brexit on trade would be relatively small. Moreover, it is certainly possible that leaving the European Union would leave the external sector better off in the long run, if Britain could use its new found freedom to negotiate its own trading arrangements to good effect.”
• “We continue to think that the United Kingdom’s economic prospects are good whether inside or outside the European Union. Britain has pulled ahead of the European Union in recent years, and we expect that gap to widen over the next few years regardless of whether Brexit occurs.”

I would take the official HM Treasury forecasts that households will be “worse off” with a very large pinch of salt. The europhile Fraser Nelson has unpicked George Osborne’s analysis here. First, the study considers no potential upsides to leaving the EU (for example the UK concluding any free trade agreements of its own over its 14 year time horizon to 2030) but does include positive assumptions that the EU will do the same. Second, even on this pessimistic analysis, it is being put about that people will be permanently poorer when it actually shows the difference will be between 29% GDP growth outside the EU, compared to 37% GDP within it. So, the most that can be claimed is that people might not be as much better off as they’d otherwise be.

–

Furthermore, the Treasury has struggled to accurately predict the performance of the UK economy (as has the IMF) on just a 1-2 year horizon in recent years, let alone a 14-year one. But it has also been sharing its homework on Brexit with the IMF and the Bank of England, despite claiming each study is mutually independent, so there’s a real risk that multiple studies are working off the same flawed assumptions.

–

What about the short-term?

–

The National Institute of Economic and Social Research estimates growth next year, in 2017, would be 1.9% if we voted to Leave compared to 2.7% if we voted to Remain.

On house prices, the worst the Treasury has been able to forecast is that a house worth £599,200 in 2018 if we voted to Remain might only be worth only £591,700 if we Leave.

–

None of this represents an apocalypse. It really is minor stuff. And Remain offers no guarantees of strong economic growth either. The most you can say is that there are arguments both ways, that rest upon the assumptions you make, and that the success of the British economy in future is affected by its competitiveness and securing access to global markets through good trade deals.

–

I agree with Wolfgang Munchau, the economics commentator of the FT, who said, “whatever the reasons may be for remaining in the EU, they are not economic.”

–

You have to make your own judgement. Mine is the economic impact of Brexit in the medium-term is financially neutral, but in the longer-term offers much better opportunities for UK growth.

–

In the short-term, if we did vote to Leave, I’d expect an emergency cabinet meeting to be held on Friday 24th June with key representatives from Vote Leave, and a negotiating position to be put out by the British Government over the weekend before the markets reopened on Monday. The real-politik would rapidly change. David Cameron would fly off to see Angela Merkel the following week, and a joint statement would be issued within a fortnight on negotiating intent for a UK-EU deal. Informal negotiations would probably continue with the EU over the Summer, with David Cameron possibly remaining as Prime Minister, at least until the Autumn conference season, to agree its heads of terms with his new Foreign Secretary and Chancellor. We would remain members of the EU right up until Article 50 was invoked and its two year time-frame expired, whereupon the new deal would kick-in prior to GE2020.

–

In the meantime, the UK Government could take a wide range of policy contingency responses to deal with any short-term drop in investment, if it did occur, such as abolishing capital allowances so all capital expenditure is treated as a deductible business expense, or lowering corporation tax to 10%, as David Green has suggested.

–

I do not claim Brexit is risk-free. But I do think the hypothetical risks are massively overblown, and the real risks well within acceptable parameters and manageable. The UK is the fifth largest economy on the planet, the fourth largest military power, has a permanent seat on the UN security council, is ranked first in terms of soft-power, and speaks the global lingua franca. The idea we couldn’t make a great success of self-governance, and exert global influence through it, is for the birds.

–

The UK will be a rich, prosperous and well-off country in the medium-term whether we Remain in, or Leave, the EU.

If we did vote Leave I’d suspect, in five years time, that we’d be wondering what all the fuss was about.–

8. The choice:

Two futures lie before us. I think this is what it all comes down to:

• If you think the single market, as it’s currently constituted within the EU, is Britain’s economic future; that it should be deepened in services, energy and digital, not lightened; and, therefore, that even having 1/28th of the say in the rules is better than none – plus you’re doing well, don’t want any short-term economic disruption and you’re not too bothered by concepts of sovereignty or politics – or you believe we have plenty of sovereignty and influence as things stand – or think that those who disagree doth protest too much, then you’re probably going to be for Remain.

• If, however, you think the UK’s future is global, that the EU will form an ever shrinking proportion of our trade, that it will increasingly be dominated by the eurozone, outvoting the UK, that the limited influence we’ll retain doesn’t compensate for the shared powers the EU has over the UK with its permanent eurozone QMV majority, and that it makes sense for the UK to be represented on global bodies itself independently, and able to control its own trade deals; that you’re confident an independent UK can be just as successful as other smaller anglosphere nations, controlling both its own laws and borders, even if this causes some short term disruption to the existing economic order, but you feel it has to be done, and won’t be that bad, then you’re probably going to be for Leave.

It has been over 40 years since the last EU referendum vote. There may not be another for decades. Therefore, in making a decision, it is entirely appropriate for it to be considered on much longer timescales, and not on a short term basis.

What’s your gut feel? Are you content with the direction the EU is going in? Do you think the EU is the future, or do you think the UK can make a better success of itself independently, and providing leadership by itself? Are you happy to vote Leave on a negotiating position, and agree the details after? Or would you want something more definitive on the table first? What sort of country do you think an independent Britain might be like compared to one that remains as an EU member state? Do you think it matters either way?

All of these are questions that only you can answer.

Personally, the renegotiation for me was the last chance. It was a historic opportunity to put our membership on a sustainable footing. The status quo wasn’t (and isn’t) acceptable. The EU fails my values tests of democracy and sovereignty I set out in Section 1, and there are a number of its policies we are already finding to our detriment. Both the Maastrict and Lisbon Treaties have ratchet clauses open to interpretation by the CJEU, which has been consistently centralising, and the constitution of the EU puts the United Kingdom at a permanent structural disadvantage. I am also deeply concerned at the track record of the EU in pursuing ever closer union, and its declared intent to take this even further in future. The only conclusion I can draw is that the EU – in its current guise – is not willing or unable to accommodate alternate interests. I no longer believe there is any prospect of meaningful reform either for the UK, or for the other nations of the EU, by remaining within it.

There are risks in both remaining and staying. However, faced with a choice between an uncertain future in an unreformed EU and the alternative, which is to leave, to retake control of the full spectrum of policy, set our own laws, and to become a fully independent, global, democratic, free-trading nation, again, the only conclusion I can reach is that it is in the UK’s interests to Leave.

We mustn’t fear to plough our own furrow. And I believe we will be able to have a far greater and more positive influence on leading the future development of humanity, both in Europe and around the world, if we do.

So I will therefore be voting Leave on 23rd June.

Picking the Players: our next government

Who will form our next government? © Daily Telegraph

My posts over the two months have focussed on trying to understand likely seat shares for each party following the General Election. A week on Friday, we will know the answer. However, the process of forming a government could take much longer, and we could be living with the ramifications of that for a full five years.

The key to this is the parliamentary maths: it is all important. There is one simple convention: the monarch must appoint as Prime Minister whoever is most likely to be able to command the confidence of a majority MPs in the House of Commons.

That does not necessarily mean whoever is the leader of the party that won the most votes or seats.

There are 650 seats in the House of Commons. For a Prime Minister to command an overall majority -able to outvote everyone else, if united in opposition – the target is 326. 326 seats gives a majority of two, because that is the margin by which it outvotes the 324 in opposition to it. For every additional MP a government party gains over the 325 “tie” line, it decreases their opposition by one, and increases their governing share by one, and therefore increases their majority by two. It is different when a party is short of a majority. When commentators and journalists talk about Party ‘X’ being ‘Y’ seats “short” of a majority they are talking about how many extra MPs would be needed for them to reach the magic 326 number.

In practice, a majority of two is generally considered to be insufficient. That’s because, over the course of a 5 year parliament, some MPs may resign their seats, defect to another party, suffer a party or parliamentary suspension for poor conduct, or even die, resulting in by-elections where the seat is lost to the governing party. In addition, the governing party is likely to have a number of what they would consider more “awkward” MPs. These MPs are more likely to rebel, or abstain, from supporting the government on matters they feel strongly about, making it uncertain if they can pass key measures in their programme.

As an example: poor old John Major won the 1992 General Election with a majority of 21 (336 seats to 315 seats) By the end of the parliament, just prior to the 1997 General Election, he’d lost so many MPs to resignations or by-elections he was without any majority at all.

2010 General Election – Recap

Before considering the 2015 General Election result, it’s worth casting our minds back to the 2010GE result:

UK GENERAL ELECTION 2010	SEATS	CHANGE
Conservative (includes Speaker)	307	+97
Labour	258	-91
Liberal Democrat	57	-5
Democratic Unionist Party	8	-1
Scottish National Party	6	0
Others	14	0

Whisper it, but Labour actually did relatively well. I (along with the betting markets, and virtually everybody else) expected Labour to be down to well under 250 seats. In fact, I expected them to be in the 230s. Conversely, I expected the Liberal Democrats to be on at least 75 seats, and the Conservatives to be in the 290s.

The Conservatives were lucky that with a highly effective targeting strategy, superior resources, good groundwork and, in several places, a convenient LD-Labour vote split that they were able to walk away with 307 seats. Their parliamentary seat shares outperformed the “swing” that the national vote shares (Con – 36.1%, Lab – 29% and Liberal Democrat – 23% and Others 11.9%) implied by about 10-15 seats.

This bonus was absolutely crucial for the coalition negotiations that followed. The Labour and Liberal Democrats could only muster 315 MPs between them. This was greater than the Conservatives on 306 MPs, excluding the Speaker, but was not quite enough to provide a realistic alternative stable government. However, it wasn’t impossible, and that prospect alone was enough to frighten the Conservatives into giving a concession on an AV referendum.

Had the seat shares been just slightly different – for instance, in line with the BBC swingometer (giving 291 Con, 266 Lab and 64 LD) – then a Labour-LD coalition, with an overall majority of 8, would have been a real option. The Conservatives could easily have been shut out of power, or forced into such serious concessions on voting reform by the Liberal Democrats that David Cameron could not get them past his party. He might have been left with no option but to resign.

Looking the other way, had the Conservatives gained just a further extra 9 seats from Labour and the Liberal Democrats, to take them to 315 seats themselves, then a Labour-Liberal Democrat coalition would never have been a go’er. They’d always have been outvoted by the Conservatives, and the Conservatives could either have done a deal with the DUP to run a minority government or give far less generous terms for a Liberal Democrat coalition, which would not have included a referendum on voting reform.

This really does show just how much difference a handful of seats can make to the government we get, and the policies it pursues. And that’s critical to assessing what may happen in GE2015.

In the event, the Conservatives ended up slap bang in the middle. They went into coalition with the Liberal Democrats commanding a total of 363 seats between them, and a government majority of 76 (363-325 * 2 = 76). Upon dissolution of this current parliament, on 30th March 2015, the coalition had  358 MPs, and still commanded a majority of 66.

2015 General Election – Party positions

Almost everyone (correctly) expects a hung parliament this year. However, unlike last time – when there were only three real players, and the only question was how heavily Labour would be defeated – there are now multiple players and no-one knows what the result will be. Minor parties have been busy outlining their post-election negotiation positions. A summary (of my understanding of the current positions, they seem to be tweaked regularly) is below.

Notes:

• Coalition is a formal agreement where the party agrees to officially become part of the government, and take ministerial positions.
• Confidence and supply can be a formal arrangement, but only that the party will support the government in votes of ‘confidence’ and to ‘supply’ the votes needed to pass its finance bills. In effect, it will vote to keep the governing party in office, and to pass its budgets. On everything else, it is free to make up its own mind. It does not take ministerial positions.

	Conservatives		Labour
Option:	Confidence and Supply	Coalition	Confidence and Supply	Coalition
UKIP	Yes	Yes	Yes+	No
DUP	Yes	No	Yes	No
Green	No	No	Yes	Yes**
SDLP	No	No	Yes	No
PC	No	No	Yes	Yes
SNP	No	No	Yes	No
Liberal Democrats*	Yes++	Yes	Yes++	Yes

*Assumes Nick Clegg remains Liberal Democrat leader. He has ruled out coalition deals with SNP or UKIP

**Green coalition with Labour yet to be ruled out, but very unlikely

+UKIP stated they can’t see circumstances in which they would prop up Labour but are yet to formally rule out any arrangement whatsoever.

++Liberal Democrat strong preference for coalition over confidence & supply

Two things leap out from this table. First, the Greens/SNP/Plaid Cymru may well act in concert, all favouring propping up Labour and consulting with one another. And, second, the Conservatives only really have the DUP, the Liberal Democrats, and UKIP to call upon as allies. The last would be considered a highly unreliable ally by the Conservatives, and possibly a divisive one.

I have not considered Respect (George Galloway) or Lady Sylvia Hermon, but both would probably incline towards Labour.

Given the projected numbers within the House of Commons, that gives Labour an advantage.

Finally, it should also be noted that Sinn Fein have consistently refused to take their seats in the House of Commons, on principle, and are highly likely to do so again this time. For all intents and purposes this removes their 5 seats from the House of Commons parliamentary equation. This lowers the target bar from 326 seats to 323 seats ( (650-5)/2 = 322.5, rounded to 323 seats) to give an effective overall majority of one.

2015 General Election – Possible seat ranges

I have already given a prediction for the election in my last post.

However, this already looks out-of-date, particularly given the ever growing strength of the SNP in Scotland. But we are blessed, or cursed depending on your point of view, with a surfeit of data in this election. That allows us to really drill down and understand how things might play out in each constituency.

Using all the data, I am as confident as I possibly can be (90%+) that seat movements will be within the following boundaries:

Seat changes	Min	Max
Conservatives losses to Labour	14	50
Conservative gains from Labour	0	4
Conservative losses to LDs	0	1
Conservative gains from LDs	6	20
Labour gains from LDs	7	12
SNP gains from LDs	7	9
SNP gains from Labour	21	41
SNP gains from Conservative	0	1
UKIP gains from Conservative	1	9
UKIP gains from Labour	0	6
UKIP gains from Liberal Democrats	0	1

Adding in the other minor parties, who I haven’t bothered to list separately, this gives the following “spread” for the bounds of seat ranges for all the parties:

All parties – forecast seat spreads:	Min	Max
Conservative	252	316
Labour	233	301
Liberal Democrats	16	38
UKIP	1	16
SNP	34	58
DUP	8	9
Green	0	1
Plaid Cymru	2	5
Respect	0	1
UUP	0	1
SF	4	5
Alliance	0	1

2015 General Election – Government thresholds 

The government will be either Conservative or Labour led, and so will the PM. My assessment of the formation thresholds for each are below:

Conservative-led governments:

• Stable Conservative minority: 320 seats or more. At this level the Conservatives would be only 3 seats short of an effective overall majority. In practice, this would probably suffice for a 5-year parliament. Almost every single MP in the House of Commons would need to unite to defeat it. All it would need to do on anything remotely that contentious would be to secure the abstention of the DUP. It would be able to implement almost all of its manifesto unhindered. However, I assess this as beyond the reach of the Conservatives, unless Labour have a truly awful night and make virtually no advance against them at all.
• Conservative minority with DUP support: 315 seats or more. At this level they would have to cut a deal (formal or otherwise) with the DUP to vote for some measures. That shouldn’t be a problem. There is considerable overlap between the parties on defence, Europe, immigration, the economy and the Union. Such an arrangement would give the Conservatives, in practice, a waver thin effective overall majority at 323 or 324 seats.  An EU referendum on Conservative terms would easily pass the House of Commons, with no concessions needed to the Liberal Democrats. However, this government would be vulnerable to defections, rebellions and by-election defeats. If Cameron chose this then, as the parliament progressed, it might struggle to get its programme through without additional deals with other parties. Unless UKIP tallied 5 seats or more, I don’t think they’d be a part of any arrangement. And, if they’d done that well, it’s unlikely the Conservatives would be in such a good position in the first place.
• Unstable Conservative minority with ad-hoc support: 310 seats or more. This is the lowest point at which the Conservatives still have, in my opinion, an option of going it alone. A deal would need to be struck with the DUP, and possibly the UKIP MPs too, to get it over the 320 vote line. It would be unstable, likely to become more so as the parliament progressed, and highly vulnerable to ambush. However, it might survive for a year or two purely because other parties (such as the Liberal Democrats) could keep it in office simply by abstaining on the Queen’s Speech and votes of confidence. Key votes would need to be negotiated on a case-by-case basis.
• Stable Second Conservative-Liberal Democrat coalition/supply and confidence: 300-315 seats. If the Conservatives clock between these number of seats, I expect Cameron to try and go for a second Con-LD coalition. The numbers work on a wide range of LD seat outcomes, from 20 (just do’able) to 30+ LD MPs, giving an effective overall majority of 14; however, it only works if Nick Clegg remains as Liberal Democrat leader. Furthermore, the challenge here is making such a coalition practicable. The LDs would be so heavily depleted in numbers, there simply wouldn’t be that many of them left to take ministerial positions and departments. In practice, I think a way would be found, but I think a coalition would really only have legs if the LDs had 25+ MPs in the parliament. Otherwise, it would be Confidence and Supply. Cameron would have to give real concessions to get the EU referendum bill through, the extension to right-to-buy, immigration reforms and an inheritance tax cut. The Lib Dems would want the STV voting system introduced for local elections, votes for 16 year olds, House of Lords reform rekindled, and an amelioration of welfare spending reductions as outlined in their manifesto. But on most other areas, an agreement shouldn’t be too difficult.
• Unstable Conservative-Liberal Democrat coalition/supply and confidence: 294-300 seats. This really is the lowest level at which the Conservatives can be sure of retaining some role in government. At 294 seats, the Liberal Democrats and Conservatives combined should be able to muster to within the 315-325 seat band. They probably need a combined a total of 320 seats to make that work effectively, there will be rebellions and splits, but it’s do’able if the LDs retain around 25 seats. All the caveats of the stable deal above apply. A soft deal with the DUP to passively support, or abstain, would probably be needed too. I suspect some increased funding to Northern Ireland would do the trick.

Labour-led governments: Labour have more options, simply because there are more minor parties that would not vote against them and risk putting the Conservatives in power. There is history here. So, the SNP, Plaid Cymru, the Greens and the SDLP will all prop up Labour. “Independents”, such as George Galloway and Lady Sylvia Hermon, would be unlikely to bring it down either. The DUP will also cut a deal if their numbers are needed, and they see advantage in it. However, all those moving parts also make Labour led governments more multi-faceted, and harder to predict, so I am less certain about composition:

• Labour minority government: 310 seats plus. Labour could go it alone on these figures, with no deals with the SNP or the Liberal Democrats, if they chose to do so. Ad-hoc support from Plaid Cymru, the Greens and SDLP and the DUP would be sufficient to govern.  Labour would be able to implement almost all of its manifesto, with concessions here and there. Once again, I assess this as beyond their reach unless Labour hold up well in Scotland and the Conservatives have a truly awful night.
• Stable Labour-Liberal Democrat coalition/supply and confidence: 285-310 seats. My assessment is that Labour will do everything possible to avoid dealing with the SNP. The two parties detest one another, and Labour know that the SNP will be unreliable and unpredictable partners. If the numbers stack-up so they don’t have to rely on the SNP, they will swallow their pride and turn to the Liberal Democrats. This will be easier if Nick Clegg is no longer leader -and he may step down anyway to facilitate such a deal, if he’s not defeated – but it probably won’t be the deal breaker. Even if a Labour-Liberal Democrat pact is short of an overall majority, it’d probably work on any combined numbers above 310 seats, possibly even slightly less, for the reasons outlined above. Minor parties would be unlikely to overthrow it. Instead, they’d prefer to passively support, or abstain, and extract concessions where they can. But its programme for government would be complex, and possibly unpredictable, as the Liberal Democrats sinewed Labour on fiscal discipline, whilst the minor parties pitched for (probably) more regional financial goodies.
• Unstable Labour minority government with tacit SNP support: 260-285 seats. If Labour drop out in this range, which is actually perfectly possible, then a minority government with tacit SNP support is most likely. Ed Miliband has ruled out a coalition, as has Nicola Sturgeon, and whilst the SNP have stated they’d be happy to strike some sort of formal ‘confidence and supply’ deal, Labour have recently been at pains to emphasise that they wouldn’t touch it. In reality, I suspect if the hard arithmetic of parliamentary reality bites, then they will. I have ruled out the Liberal Democrats of propping up such a deal, on the basis of Nick Clegg’s comments, but (once again) if he is not leader, it’s not impossible. Then again, if the SNP do get 50 seats or more, this arrangement would stand by itself and the Liberal Democrats wouldn’t be necessary.

No-man’s land:

No man’s land arises when no party has any clear mandate to govern and/or has no obvious path to form a stable government. Unfortunately, this is quite likely.

Typical no man’s land seat ranges include:

• Conservatives on between 280 and 290 seats
• Labour on between 250 and 260 seats

One way of thinking about this is to consider what the Conservative/Labour seat tallies would have been in this election if the SNP surge had not occurred.

The gap between the Conservatives and Labour was only 49 seats at GE2010. So, without the SNP surge, and assuming gains from the Liberal Democrats giving neither main party any net advantage, a simple switch of 25 seats from Labour to Conservative would have put Labour just ahead. The SNP is likely to cost Labour (at the very least) 21 seats in Scotland, and that’s if the SNP have a very bad night. It’s actually more likely the SNP cost them the full 41. You’ll see that, if you add those to the Labour seat ranges above, that’d have put Labour and the Conservatives at close to seat parity. Which explains why this is no-man’s land: Scottish ex-Labour voters voting SNP this time are doing so because they expect their SNP MPs to be better at holding a Labour government to account, in Scotland’s interest, than any Scottish Labour MP.

I simply don’t know what the government outcome would be in no man’s land. If you want to investigate yourself, you can play with this excellent FT coalition calculator here. Any Labour/SNP arrangement would be extremely weak, and vulnerable to a Conservative ambush whenever the SNP abstained. Even with all of the SNP votes behind Labour, such a government would be well short of a majority.

Conversely, a Conservative-led government could be brought down at almost any time. Even with Liberal Democrat support, it wouldn’t command much more north than 300 MPs. One possible test is whether Conservative/Lib Dem MPs combined could outvote Labour/SNP combined. But I don’t expect that to wash either, because Plaid Cymru, Greens and the SDLP will work to block the Conservatives out of power. Perhaps a ultra-weak Conservative PM would be left in office – by Labour abstaining on the Queen’s Speech – until Labour elected a new leader. And then brought down.

I’d expect a second election within 12-18 months. Another possibility is a grand coalition, between Labour and the Conservatives, but I don’t expect that to be tried until a second general election has also failed to deliver a decisive outcome.

Betting

For what it’s worth, my personal views on the results are as follows:

• Labour will do very well in metropolitan areas, such as London and Manchester
• The Conservatives will do well in the south-west, against the Liberal Democrats
• The Conservatives will hold up ok in the Midlands battlegrounds
• Labour will pick off several key seats from the Conservatives in the North-West
• The SNP will clean-up Scotland

So..

• The Conservatives won’t drop below 270 seats
• Labour will not clock higher than 290 seats
• The Liberal Democrats will be below 30 seats (but could have a disaster and drop below 20 seats)
• UKIP will be below 6 seats
• SNP will be above 45 seats

That makes my betting choices as follows:

• Hung Parliament – the price for a hung parliament is still 1.12 on Betfair exchange. This is ridiculous, and basically buying free money, with a 10%+ tax-free return on your money inside 10 days. I’ve fully played out this market, but this is still exceptionally good value. It should be 1.03-1.05, now, so, if you have deep pockets, you might want to consider.
• Next government – back Labour Minority at 2.8, or Conservative Minority at 6.6 or Con-LD coalition at 4.9 on Betfair exchange. Only the Liberal Democrats will be forming a formal coalition, and I don’t think Labour will do well enough to make a LD-Labour coalition a runner. Only the Conservatives and Labour can form minority governments. And I don’t think there’s much evidence to suggest anything else will be a winner. Labour minority is the most likely, but please do your own research. I am on all of those options.

Conclusions

I will be watching the exit poll, due to be released at 1opm next Thursday night, very carefully indeed to see where it puts both main parties. It will be our first real clue as to the result and, I suspect, within +/-10 seats for both the main parties nationwide.

I’ll be looking for the Conservatives above 290 seats, or Labour above 285 seats. If we don’t get either of those, we will have something messy:

• Labour must take at least 30 seats from the Conservatives just to be sure of standing still on their 2010GE result of 258 seats
• Labour will take between 15 and 40 seats from the Conservatives. If it I had to call it now, I’d say around 30 seats.
• But the Conservatives cannot afford to drop more than 20 seats to Labour to be sure of staying in government – so David Cameron has a fight on his hands to stay as PM
• Conservatives and Liberal Democrats combined will need to sum to 320 seats for a stable government
• If Labour and the SNP seat totals (combined) are more than 5 seats ahead of the Conservatives just by themselves (say Con at 290 seats stays in government with Lab at 255 + SNP at 55 seats) there will be all sorts of arguments about legitimacy from Scotland. The opposite also applies, vice-versa, if Labour and the SNP form a government, with the Conservatives having a clear majority in England.
• There could be several resignations within 24 hours of the result – Ed Miliband will go quickly if he does worse than his GE2010 seat total and can’t become PM
• If David Cameron doesn’t remain as PM, he will also go quickly
• If we get an unstable government, expect new leaders to be elected soon, and parties put on an election footing by Autumn

I fear the great British public are deeply disillusioned (cynical?) this time, and want everyone to lose, and no-one to win. By a strange process of osmosis, they have a habit of normally getting what they want, so I expect a result similar to the one below:

FINAL Casino Royale FORECAST:UK GENERAL ELECTION 2015	Seats	Change
Conservative	289	-18
Labour	259	+1
Liberal Democrat	24	-33
Democratic Unionist Party	9	+1
Scottish National Party	51	+45
UKIP	3	+3
Others	15	+1

And I very much doubt David Cameron would remain as Prime Minister on those numbers. But we’ll see what happens next week..

That’s it folks, see you on the other side.

Good luck.

The Primary Battleground: Labour v. Conservative

Photo: AP / Eddie Mulholland

There is now less than one month to go until the General Election. However, despite this being the most multifaceted election in living memory, it is worth remembering that the Conservatives and Labour currently hold over 85% of all the seats in the House of Commons. Under almost every conceivable scenario, this will remain the case after 8th May.

Constitutional convention demands that the Prime Minister is appointed by the monarch on the basis of whoever is most likely to be able to command a majority in the House of Commons. Since both the Conservatives and Labour will possess (by far) the greatest numbers of seats in parliament in comparison to all the other parties, one of these two men will be Prime Minister after 8th May. The question is which.

The answer to that question will be determined through the dozens of Labour-Conservative duels that are currently taking place up and down the country. In previous blogposts I have examined the prospects of the Liberal Democrats in England and Wales, and Scotland as a distinct nation, separately.

Today, it is the turn of those key Labour-Conservative marginals in England and Wales: what I have deemed the ‘primary’ battleground. 

The first step in doing the analysis to define the seats that make up the battleground. Using the excellent UK polling report Conservative defence list, which ranks seats by percentage majority, I have produced my own list of 75 key Conservative-Labour marginals.

I have produced this by stripping out Scotland, and any Conservative seat facing a nominal Liberal Democrat challenge. Although the Liberal Democrats do have a shot at Watford, and possibly an outside chance at Oxford West and Abingdon and Montgomeryshire, I do not expect them to pose much of a threat to sitting Conservative MPs. You may disagree, but due to their collapse in the national polls and their need to focus almost all their resources on defending existing seats, I can’t see them building on their 2010 vote here. I have also ignored any Labour targets above their 75th best Conservative prospect. This is on the basis that Labour are simply not doing well enough in the national polls to justify analysis beyond that point, which would represent over a 6% swing from Conservative to Labour.

Therefore, the most marginal seat on my list (no. 1) is North Warwickshire, with a majority of just 54 votes, and the least (no. 75) is Battersea, with a majority of 5,977.

It is worth recalling the conclusions from my two previous posts at this point. Labour started with a ‘Scottish handicap’ on my earliest forecast, which increased the nominal Labour-Conservative seat gap in England and Wales from 48 seats to 75 seats. I then went on to forecast that the Liberal Democrats would surrender 13 seats to the Conservatives, and 10 to Labour, in England and Wales. Therefore, the gap for Labour to close is 78 seats – if they can strip the Conservatives of 39 seats, or more, Labour will be the largest party.

Analysis

I decided to approach this in two ways: (1) through a “bottom-up” forecast (using data from Ashcroft constituency polls, and any local information on the prospects of the candidates; to try and ‘predict’ the result in each individual seat), and, (2) by a “top down” forecast (using predicted shares of national votes on the day, with suitable adjustments for incumbency and regional factors).

For both approaches, I also added a couple of extra data points: whether the seat was a Tory 40:40 target, or not, and whether the candidate was an incumbent MP, or not.

Bottom-up

I was led by the Ashcroft individual constituency polls for the bottom-up analysis. These have been taken in most of these key marginal seats over the last year. They are extremely useful in assessing the underlying level of support for each of the main parties. However, although the methodology is sound, they need to be taken with a pinch of salt. They are only snapshots at a point in time, as Ashcroft himself concedes, and the true picture may since have varied wildly with the national and local campaign efforts. Further, it is much harder to poll a seat of 55,000-70,000 electors accurately with a sample size of 1,000 than it is a national electorate in the tens of millions. The margin of error is much higher, and the true picture at that point in time could have been anywhere within +/- 5% of the numbers reported.

Nevertheless, it’s the best data we have to go on. What I’ve done in terms of analysis is very crude. I’ve annotated, next to each Ashcroft poll, the month in which it was taken. Using the UK polling report ‘poll of polls’ data I’ve then averaged the Labour lead for that month next to it. The national polls have moved over the last 9 months, they are now broadly level rather than reflecting a 3-4% Labour lead, so doing this allows me to adjust for the predicted national effect on 7th May. I’ve then reviewed each seat in turn with an ‘instinctive’ pass. Generally, I’ve discounted any seat with an Ashcroft poll Labour lead of >10% as a lost cause and given a Tory hold where the lead is <5%.

Model 1 – Casino Royale adjusted Ashcroft constituency polls (England and Wales): Conservatives lose 33 seats, Labour pick up 32 seats and UKIP 1 seat.

I think these figures look plausible. I have 11 extra Conservative “holds”, and correspondingly fewer Labour gains, over what Ashcroft found. However, two of these seats he did find to be statistical ties and the other nine were Labour gains by less than 5%.  The seats are: Stockton South, Morecambe and Lonsdale, Brighton Kemptown, Hove, Halesowen & Rowley Regis, Pudsey, Nuneaton, South Swindon, Croydon Central, Norwich North and High Peak.

In general, I’ve found them to be Tory holds due to opinion poll movements, and strong local candidates and campaigns. However, even on these figures, the Conservatives would be down to 285 seats after the election, and almost certainly out of power.

There are a possible further five Conservative holds using this method: Amber Valley, Lincoln, Northampton North, Keighley and Wirral West. However, I did not count these due to strong Labour challenges in these seats and fear of skewing the results.

Top-down

I started this by forecasting forward my predicted GB vote shares on polling day. This is based on a 4% Conservative lead GB-wide. Although the average of current polls show a statistical tie, there have been a few telephone polls in recent weeks showing the Conservatives on 36%, and one online YouGov poll showing them on 37%. In recent electoral history, the poll showing the Conservatives on the best vote share has tended to be the most accurate. In addition, there has been a corresponding pattern of Conservative governments doing better than Labour oppositions in the final weeks before election day. Peter Kellner at Yougov is in a similar place with these assumptions.

So I expect further relative movement to the Conservatives by 7th May, and a slight differential turnout in their favour, sufficient to deliver the following vote result on the day:

GB ONLY	2015 %	2010 change +/-%
Conservative	36.27%	-0.6%
Labour	32.28%	2.6%
Liberal Democrat	8.59%	-15.0%
Scottish National Party	3.78%	2.1%
Plaid Cymru	0.56%	0.0%
Green	3.99%	3.0%
UK Independence Party	13.31%	10.2%
Others	1.22%	-1.2%

By my reckoning, this would give numbers for England and Wales as follows:

ENGLAND ONLY	2015%	2010 change +/-%
Conservative	39.00%	-0.6%
Labour	32.85%	4.8%
Liberal Democrat	9.10%	-15.1%
Green	4.00%	3.0%
UK Independence Party	13.90%	10.4%
Others	1.15%	-2.5%

WALES ONLY	2015 %	2010 change +/-%
Labour	36.50%	0.3%
Conservative	24.50%	-1.6%
Liberal Democrat	6.00%	-14.1%
Plaid Cymru	11.00%	-0.3%
UK Independence Party	18.00%	15.6%
Green	2.20%	1.8%
Others	1.8%	-1.6%

This then needs to be applied to seats. What I’ve done is to apply some standard splits to the 2010 general election voteshares for each party in each seat. I’ve then “tested” the results by backfitting them to see if they deliver, in aggregate, a similar national voteshare to those voteshares predicted above (which they broadly do, but UKIP needs a boost from new voters to make up the correct national total)

The standard vote splits (applied to the 2010 constituency totals) are below:

LD Standard Split
LD	34.00%
Tory	16.00%
Labour	31.00%
UKIP	8.00%
Green	9.00%
Others	2.00%

Labour Standard Split
LD	1.00%
Tory	2.00%
Labour	87.00%
UKIP	5.00%
Green	3.00%
Others	2.00%
	100.00%

Con Standard Split
LD	2.00%
Tory	86.00%
Labour	1.00%
UKIP	9.00%
Green	1.00%
Others	1.00%
	100.00%

BNP 2010 Standard Split
LD	1.00%
Tory	5.00%
Labour	7.00%
UKIP	70.00%
Green	1.00%
Others	1.00%
BNP	5.00%
NO VOTE	10.00%
	100.00%

UKIP 2010 Standard Split
LD	1.00%
Tory	9.00%
Labour	3.00%
UKIP	85.00%
Green	1.00%
Others	1.00%
	100.00%

When I do this, and apply it to the 75 key marginals, I get the following:

Model 2a – Casino Royale predicted voteshares (England and Wales): Conservatives lose 25 seats; Labour gain 25 seats.

Clearly, this method is a bit simplistic. I am basically applying a form of uniform national swing (UNS). This isn’t likely to be very accurate – as it takes no account of regional or local factors, or any incumbency bonus – but it does give a broad indication of how things might stack up.

Let’s refine it a bit. For my second attempt on the top-down, I have allocated a 1% first-time incumbency bonus to any Conservative MP re-standing for election in 2015 who was first elected in 2010. I haven’t done anything fancy here, I’ve simply taken the total turnout for the seat and given 1% of that (extra) to the Conservative candidate. It might be a bit less, it might be a bit more, but broadly it gifts them between an extra 400-600 votes, which seems about right for a new MP who’s been working the seat hard for 5 years, helping people out along the way. I now get the following:

Model 2b – Casino Royale predicted voteshares with incumbency (England and Wales): Conservatives lose 14 seats, and Labour pick up 14 seats.

However, that’s still not quite right. We know UKIP have regions of concentrated strength (in the east of England, and around Kent, Essex and near some northern English cities in particular) and Labour in London, where there appears to be a much greater Conservative -Labour swing, and where 45% of all Labour party members are based. We also know that the Lib Dems are likely to suffer a lower vote share where they are not in contention this time, as they get squeezed by both main parties.

So, I’ve done a final model adjusting for all these factors. My figures are below:

Model 2c – Casino Royale predicted voteshares with incumbency, LD adjustment, UKIP regional adjustment and London adjustment (England and Wales): Conservatives lose 23 seats, Labour pick up 23 seats, and UKIP pick-up 1 seat.

You can see a detailed breakdown here.

I’m still not fully happy with this final model. Some results just don’t look right, such as Cannock Chase staying Conservative, Carlisle looking very close, and Stockton South going Labour. But I’m not going to manipulate the model to suit my intuition. Even if I spent a disproportionate amount of time on still yet further analysis, I don’t see how I could make a forecast (any forecast) that’s more accurate. This election is so close, and the dynamics so complex, it might simply come down to turnout on the day.

However, 23 seats is more-or-less in between my 14 seat and 32 seat book-ends, so I’m going with it for the national seat forecast. May God have mercy on my soul.

Adding this to my overall forecasts so far (with some adjustments for Plaid and UKIP, which I haven’t gone into on this thread) gives this grand UK total forecast for 7th May 2015:

UK WIDE 2015
Party	2015 Seats	Gains	Losses	2010 net change +/-
Conservative	294	15	28	-13
Labour	261	34	31	3
Liberal Democrat	25	0	32	-32
Democratic Unionist Party	9	1	0	1
Scottish National Party	40	34	0	34
Sinn Fein	5	0	0	0
Plaid Cymru	4	1	0	1
Social Democratic & Labour Party	3	0	0	0
Green	1	0	0	0
Alliance Party	0	0	1	-1
UK Independence Party	6	6	0	6
Respect-Unity Coalition	1	1	0	1
Others	1	1	1	0

Notwithstanding the slightly tentative forecast, we can make some broad conclusions:

• Whichever way I cut it, Labour look on course to pick up between 15 and 35 seats from the Tories
• Incumbency will be pretty crucial for determining if sitting Tory MPs hold on, or not
• The collapse of the 2010 GE Liberal Democrat vote will break in Labour’s favour, and cost the Conservatives seats, but not as many as one might think
• UKIP look like they’ll be squeezed in these main battles, except in areas where they are naturally strong
• These forecast seat gains are short of what’s needed for Labour to become the largest party
• But David Cameron will really struggle to remain Prime Minister on these numbers anyway – personally, I think he has to keep his direct Labour losses to 20 or less

In terms of betting opportunities, there’s fairly slim pickings here in terms of value. Given the unpredictable nature of precisely which seats may fall in the top 30 key marginals, I’m not betting on too much. Once again, it comes down to your confidence as a punter. However, my own personal picks (all on a successful Conservative defence) are below:

• Stockton South – 11/10 on the Conservatives with Corals. James Wharton is well regarded in his constituency and has been working hard over the past five years. I expect him to do better with his incumbency bonus than almost any other Conservative MP in an ultra-marginal seat. Survation, conducting a poll for Unite, even had him ahead in November. I think it’ll be close, but he’ll cling on.
• Blackpool North and Cleveleys – 5/6 on the Conservatives with William Hill. All of my models have the Tories holding this seat. This looks this value to me.
• Morecambe and Lonsdale – 11/8 on the Conservatives with Ladbrokes. I understand the local Conservative MP is well-known and fairly well respected. Almost all of my models show a hold.
• Hove – 2/1 on the Conservatives with Betfair Sportsbook. This seems a bit long. You are ‘gambling’ if you back this, but I expect the result to be very close and for the Conservatives to hold. Just.
• Halesowen & Rowley Regis – 6/5 on the Conservatives with Corals. This looks like a hold to me. I’m on.
• Bristol North West – 8/15 on the Conservatives with Corals. As far as I know, there has been no constituency poll here. The Liberal Democrats are in 2nd place, with a Labour a strong 3rd. But it should be a relatively easy Conservative hold.
• Cleethorpes – 4/6 on the Conservatives with Corals. A long way down the target list, but this should be a comfortable Conservative hold. I’m on.

Health warning: please do not rely on my model for your own betting, and please do your own research.

Thanks for reading.

In my next post, I’ll examine the possible compositions of the next government, and the various thresholds each party will need to achieve in order to form it.

Libdemgeddon? You don’t want to miss a thing.

It is fiendishly difficult to predict the performance of the Liberal Democrats. Their historical seat performance has been surprisingly uncorrelated to their national vote share in comparison to the other mainstream parties.

At the 2010 General Election, following a surge in support during the debates, the consensus amongst almost all punters (including myself) was for the Lib Dems to pick up at least 15-20 seats. In the event, they lost five, including some of their safest; Winchester, Harrogate and Knaresborough, Montgomeryshire and Oxford West and Abingdon. They also came close to losing St. Ives too. All had majorities of over 7,000 votes.

If that happened when the Lib Dems enjoyed a surge in support, then how will they fair when the current UK polling average gives them just 7%, just under a third of the 23% they polled in the 2010 General Election?

No-one knows. The Liberal Democrats draw much of their strength from local grassroots, and the personal votes for their candidates; they are seen as more apolitical and community grounded than MPs from other parties. However, because the result this time could hinge on just a handful of seats, we must at least *try* to model them.

Prepare for some heroic assumptions.

In my last post, I focussed on predicting Scotland as a country. In this post, I will focus exclusively on the Liberal Democrats in England and Wales alone. But, put the two together, and.. hey presto: you have my forecast for the performance of the Liberal Democrats in the 2015 General Election.

We must first understand where the votes have gone. Peter Kellner did a very interesting analysis in the Guardian last month. Adjusting for England and Wales only, the 6.37 million votes cast for the Liberal Democrats in the 2010GE has collapsed to just over 2.1 million now. But I’ve assumed that some of the floaters will return to the Lib Dems and arrived at a forecast figure of 2.41 million. That’s 38% of the 2010 General Election tally, and equates to a national vote share of 9% assuming turnout is similar to last time. So, a little higher than the polls are currently showing.

That’s a bit too neat for a rule-of-thumb forecast. So, I’ve looked at aggregated data within the sub-samples of the opinion polls. I’ve then forecasted the national poll shares forward (how these might move) to come up for a forecast for Election Day. One (important) health warning: I didn’t do anything to adjust for turnout, new voters, voters who’ve died, moved abroad etc. because (a) I didn’t think it would have a huge bearing on the results, and (b) I have better things to do with my time.

This has allowed me to come up with a “standard split” for where the 2010 Lib Dem votes might go. I’ve used a 35% retention as a guide:

2015 standard split (as % of 2010 Liberal Democrat vote)

• Liberal Democrat (loyal) 35%
• Conservative 15%
• Labour 25%
• UKIP 14%
• Green 8%
• Others 3%

If we apply these shares to all 46 Liberal Democrat English and Welsh seats (making no adjustments for turnout) we get (drumroll) .. no Liberal Democrat holds.

Model 1 – Uniform Standard Split: Conservatives pick up 33 seats, Labour 12 seats and Plaid Cymru 1 seat. No Lib Dem holds.

This obviously isn’t going to happen. Why? Because the Liberal Democrats vote is disproportionately concentrated in their existing seats. In the 2010GE they polled 16.4% of their national vote in just these 46 seats, when proportionately to the number of English and Welsh seats in total it should have been 8%. They score better where they have a local council and parliamentary presence.

Secondly, the Lib Dems are concentrating almost all of their resources in defending their existing seats, so any reduction in national vote share should be “bunching up” where they are actively fighting and have that local presence. And, finally, and most importantly, we have polling evidence from Lord Ashcroft to tell us this uniform standard split isn’t so.

The Ashcroft polling is interesting. He has polled all but eight of these 46 seats over the last year. A simple average of his findings gives a vote retention of 68.2% of the 2010 vote share, and a mode of 63.8%. Almost an exact flip of the 35/65 national retention.

So, for my second model, I’ve simplified to a “LD constituency split” for where the 2010 Lib Dem votes might go within each constituency.

2015 LD constituency split (as % of 2010 Liberal Democrat vote)

• Liberal Democrat (loyal) 65%
• Conservative 9%
• Labour 15%
• UKIP 7%
• Green 3%
• Others 1%

I then tweaked the UKIP vote in each constituency (doubling it) as in most cases it was starting from a relatively low base. I also adjusted both the Tory vote and Labour vote to 95% of their 2010 score (assuming the votes would be down, but the differences would broadly level out) and applied that model uniformly across the same Liberal Democrat constituencies. Once again, nothing fancy with turnout was done.

Model 2 – LD Constituency Model: Conservatives pick up 27 seats, and Labour 11 seats. Lib Dems hold 8 seats.

However, that still didn’t look right. We know from Lord Ashcroft that some Lib Dem incumbents are doing much better than that. They have large personal votes, encouraging local results, and a lot of local tactical voting in their favour. Furthermore, the Conservative and Labour votes are not holding up that anything like that uniformly across the country. Not to mention the regional rises in the UKIP vote.

So I tried one more time. This time, I applied a constituency weighting to each of the Liberal Democrats, Conservatives, Labour, UKIP and Green 2010GE vote tallies in each constituency. But I maintained the standard 2015 LD constituency split.

Statisticians will hate this. Yes, to some extent, the two different weightings will compensate and/or overlap with each other (take your pick) and it’s ugly and imprecise. But I reviewed each constituency in turn, adjusted the weightings, and think they look broadly correct.

My assumptions:

• In no constituency will the Liberal Democrats retain more than 85% of their 2010 vote. Yes, there are large personal votes. But when you are down 2/3rds on your last election this will tell (to some extent) everywhere. Some of the Ashcroft polling showed a 97%+ retention. I could be wrong, but not all votes are personal. It seemed fantastical to do anything else.
• The flipside is that nowhere have I assumed the Liberal Democrats will drop below 50% of their 2010 vote. Incumbency and the local profile will have some effect, and this should help mitigate their voter losses.
• Liberal Democrats *will* drop further where there is no incumbent re-standing. I have them dropping to an average of 60% of their 2010 vote where they are not re-standing. It’s closer to 75% where they are re-standing. Liberal Democrats really will be relying heavily on personal votes this time.
• Whether it’s a Tory 40:40 target, or not, makes only a nominal difference in this analysis. Except it may make the 2010 Tory vote share a little more resilient.
• The Tories drop their 2010 vote almost everywhere. I have them ranging from 55% retention in Bradford East to 95% in Bath. In most cases between 80-90%.
• Labour increases their 2010 vote share almost everywhere too. I have them ranging from a ‘freeze’ on 100% in Brecon to 150% in Twickenham. In most cases between 110-125%.
• UKIP increases vary. A lot. From no change in Bristol West to 800% in Portsmouth South, the variations are highly regional and demographic-based. In most cases they are between 350-450% up on their 2010GE vote share.
• Greens increases vary too. From no change in Mid Dorset and Poole North, to 500% in Bristol West. Mostly in the 150-250% bracket.

And here are the results:

Model 3 – Casino Royale adjusted LD Constituency Model (England & Wales): Conservatives pick up 13 seats, and Labour 10 seats. Lib Dems hold 23 seats.

You can see a detailed breakdown here.

Adding this to the Scottish seats forecast gives this grand UK total forecast:

UK Wide Forecast	2010 GE	2015  GE	Changes
LD Seats:	57	25	-32
Con Seats:	0	14	+14
Lab Seats:	0	10	+10
SNP Seats:	0	8	+8

However, another health warning: the most interesting thing I found is that 16 of the seat results were very marginal – with a majority of less than 5% – and 7 ultra-marginal, with a majority of less than 1%.

For the Liberal Democrats, it’s very much a case of their seat spread being a mile wide but an inch deep. They could go as high as 33 seats or as low as 17 seats. But them retaining more than 35 seats is for the birds.

For the Tories only 7 seats look absolutely nailed on gains: Portsmouth South, Wells, Mid Dorset and Poole North, Chippenham, Solihull, Taunton Deane and Somerton and Frome. However, on current polling, they are very likely to do better: some of the remaining Lib Dem marginals will fall to them. It’s a question of which.

For Labour there appear to be 8 seat gains in the bank: Hornsey and Wood Green, Norwich South, Redcar, Bradford East, Cardiff Central, Burnley, Manchester Withington and Brent Central. Their extra two (Birmingham Yardley and Bermondsey and Old Southwark) are forecast to go to them but you couldn’t be certain of either. Particularly not Bermondsey, where I have them winning by 226 votes.

Finally, I overlaid the betting odds on each of these constituencies to see where value might lie.

My conclusions are below. If I’m right, there’s both money to be made on the Conservative ‘dead-certs’ as well as value in the more marginal possibilities. I am not betting on the Liberal Democrats anywhere (you may wish to do so but I don’t) because the combination of odds offered, and uncertainty of black swan losses this time round, doesn’t make me confident enough to back them anywhere.

• Cheltenham – 11/5 on the Conservatives with Bet365. I had the Liberal Democrats holding this by just 119 votes. However, the Ashcroft poll showed the Conservatives 15% ahead (40% Con to 25% LD) before the consistency specific question on voting intention was asked. That’s a huge gap to close on personal/tactical votes alone, and it looks like it could be very close to me.
• Bath – 7/2 on the Conservatives with Ladbrokes. Like Winchester and Harrogate in 2010, what looks on the face of it like a safe Lib-Dem hold may not be. Particularly with the incumbent of 23 years (Don Foster) standing down. I have a Lib Dem hold by just 442 votes. But I think it could go either way, and the current odds represent value.
• Brecon and Radnorshire – 6/4 on the Conservatives with Ladbrokes. I think this could be like Montgomeryshire in 2010. The polling is very close and I have the Conservatives picking it up by 598 votes. Worth a punt.
• Chippenham – 8/15 on the Conservatives with Ladbrokes. I have the Conservative taking this by a majority of over 7,000. Why the odds are still this long, I don’t know, but I think it’s excellent 50% return on your money inside 8 weeks. I’m on.
• Cardiff Central – 1/2 on Labour with Bet365. Similar reasons to Chippenham – I have Labour taking this by almost 5,000 votes. Seems a good price to me.

However, usual warnings apply: please do not rely on my model for your own betting, in fact I’d strongly recommend you don’t, and please do your own research.

Final note: I did a “back check” to see how the patterns of the votes for the Liberal Democrats might fall, nationwide, this year. Counting up the votes forecast from within these 46 seats (using my model) and assuming the Liberal Democrats poll 45% of their 2010 general election score in their next 47 target seats (those they don’t hold, but are the next best prospects for them) means that they’ll get 45% of their votes this year in just 93 seats.

That leaves 55% of their vote in the remaining 480 England and Welsh seats. That would give an average vote share in those remaining seats of just under 3,000 votes.

Given that most English and Welsh constituencies have over 60,000 electors that puts the Lib Dems at risk of losing an awful lot of deposits.

How this translates to the primary Con-Lab marginal battleground will, of course, be crucial to the election. And it’s that battleground that will form the subject of my next post.

Scotland: critical

I’ve been wrestling with ideas for a new blogpost for some time. This one was originally going to be a summary of my thoughts on the potential shape and colour of our next government. In order to do that, I calculated I first had to come to my own view on the probable 2015 General Election result. However, this is going to be one of the most unpredictable (and complex) general elections in decades. There are more political parties, fighting across battlefronts that are much more localised, than ever before. That has rendered most models of uniform national swing far too simplistic to give an accurate indication of the likely result. As Mike Smithson regularly says, the next general election won’t be decided by national party vote shares but by who wins in each of the 650 individual seats.

So, I couldn’t work out a way of coming to a view on the General Election result without doing a “bottom-up” forecast. That is: work out who I think is likely to win each of the constituencies that are realistically in contention, and then stitch the whole picture together.

However, when I tried to do that (in one go) I quickly became unstuck. It takes ages. There are over 200 seats that could potentially change hands nationwide this time. And it’s just too much to do in one hit (not to mention the analysis on the possible composition of the government)

So, I’ve decided to break it down into manageable chunks. This is the first post in what will, hopefully, be a short series.

I’m going to start with what I think is the most interesting part: Scotland.

In the 2010 General Election, not a single seat in Scotland changed hands. The political map was an exact replica of 2005, and delivered 41 Labour MPs, 11 Liberal Democrats MPs and a single MP for the Conservatives. The overall gap between the two main parties at Westminster (Conservative and Labour, in case you didn’t know) was only 48 seats: 306 v. 258 seats, respectively. That means that, all things being equal, a simple switch of 25 Conservative marginals to Labour would suffice to make them the largest party, and 68 Labour gains (from any party) would give them an overall majority.

But all things are not equal: the political landscape in Scotland has fundamentally changed. It started with the (unexpected) outright victory of the SNP in the Scottish parliamentary elections in 2011. That made an independence referendum inevitable. For a time, not much at Westminster changed. It seemed as though the next election, again, would be similar to the last one. But, around August last year, something fundamentally changed. The independence referendum campaign captured the imagination of many Scots. A large minority started to coalesce around the “YES” offering. And, although that independence referendum was lost, it was lost by a smaller margin than expected, and that sentiment hasn’t gone away. Those “YES” voters have, by and large, nailed their allegiance and colours firmly to the SNP mast.

And the SNP have since gone from strength to strength. Their membership has quadrupled from ~24,000 to over 100,000 members now, which makes them larger than the (UK-wide) UKIP and the Liberal Democrats put together. That gives them an awful lot of ground activists. In addition, the Westminster YouGov opinion polls have (since late October) shown a reversal of the previous steady-state SNP and Labour polling positions. The SNP now have a very consistent 20% lead over Labour.

In the 2015 General Election, it’s not inconceivable that all but a tiny handful of Scottish seats could switch. That’s upwards of 50 seats (I’m not considering the six existing SNP seats as ‘in play’) and an earthquake of a political realignment. The only close parallel I can think of is the 1918 General Election, when Sinn Fein swept the board across the Irish Sea, apart from (modern day) Northern Ireland.

It’s Labour that stand to lose most. Over 15% of their existing parliamentary party is Scottish. If they lose all of their 41 seats in Scotland, it means they’d be lumbered with a significant additional handicap in the upcoming election. They’d have to gain 109 seats in England and Wales to compensate and win an overall majority.

And it’s that which makes Scotland critical. That sort of performance was last achieved by an opposition in 1997, when Tony Blair achieved his landslide election victory, and – I’m sure you’ll agree – Ed Miliband isn’t quite achieving that level of popularity. He could perhaps have done it had Scotland stayed with him. Without it, he has a very serious challenge indeed.

Anyway, enough of the back story. How have I done my analysis? 

Simplistically, and subjectively, is the answer. I’m not a statistician, and don’t pretend to be one. Furthermore, there are far better analysts out there than me. The very best (in my view) is Antifrank. Antifrank is a political betting hero. He spotted the potential in Scotland well before anyone else, and got on the SNP at 50/1 in several seats last year. He’s since maintained a regular blog on Scotland, and nothing I can say here will beat his analysis, so I’m not going to try. If you’re interested, start here. He explains things very well (I think he’s going to make a mint)

However, I wanted to arrive at my own view anyway, and I at least hope it’s ‘informed’ subjectivity. Plenty of highly-qualified statisticians have come up with wildly different forecasts for the general election result, so I respectfully hope my forecast will be no better or worse than those.

What I’ve done is to take a systematic approach to each constituency. I have looked at each of the Scottish seats in the following way:

1. Read about it (using the excellent election guide on UK polling report)
2. Check the Polls (Scottish national polls, and constituency polls)
3. Review the Betting Odds (best indicator we have of what’s happening locally)
4. Check candidates (leader of a party, new candidate, popular MP, or MP standing down)
5. Targets (any special strategy, or groundwork effort by the parties)
6. Local factors and geography (where is the seat, what are the local results, any trends etc.)
7. Check intelligence (forums, blogs, other predictions)
8. CR “intuitive” check (extrapolation, testing my thinking, cross-checking the above)

And the results are… unremarkable! See summary below, or my full prediction here:

2010 GENERAL ELECTION	Con	1
	Lab	41
	LD	11
	SNP	6
		59
			Changes on 2010
2015 GENERAL ELECTION	Con	2	+1
(Casino Royale Scottish forecast)	Lab	15	-26
	LD	2	-9
	SNP	40	+34
		59

Despite doing all of that, my prediction falls out very close to the current Ladbrokes ‘seat line’ for the SNP (50:50 betting chance of the result being above or below the line) of 41.5 seats in Scotland.

I didn’t cheat (honest) but I still can’t work out if that’s me converging on the average, being led by the markets, pure coincidence, or (the least likely) good analysis. But the interesting part is that the forecast is not actually quite as optimistic for the SNP as the most recent Ashcroft polls have suggested. I’m still in a similar place to the February predictions.

In other words, I don’t think the SNP have advanced further since then. It’s worth remembering not *all* Scots are nationalists, not all Scottish Labour voters will defect to the SNP, not all YES voters will turnout and vote SNP in May, and there is increasing unionist organisation to try and stem the tide – although this will be highly limited in effectiveness.

Some conclusions:

• The SNP are doing very, very well indeed (but aren’t quite sweeping the board)
• The Conservatives are holding up fairly well in the Scottish borders
• The swing from Labour to SNP is pretty consistently in the 21-26% band
• The Liberal Democrats are in line for a hammering (they’ve been struggling to hit 5% in Scottish polls since January) and will lose almost all their seats
• But Charles Kennedy and Alistair Carmichael will hold on
• It will not help Labour where their sitting MP is standing down (Edinburgh South-West and Midlothian)
• In the case of seats like Aberdeen South and Stirling, there may be some unionist tactical voting that could help Labour
• Not all of my individual seat predictions are the betting favourites
• And there are still a few constituency betting opportunities in my opinion

These are – please do your own research (health warning: some of the Ladbrokes markets were down when I scoured the odds, so these aren’t necessarily still the best odds):

• Conservatives in Dumfriesshire, Clydesdale and Tweedsdale (the Ashcroft constituency poll found the Conservatives tied with the SNP, but did not name the candidates including the incumbent MP, David Mundell, so most likely deflating voting intention for him. Plus, I also expect him to benefit from unionist tactical voting in one of the strongest unionist areas) are a good bet at 10/11 with William Hill
• Conservatives in Berwickshire, Roxburgh & Selkirk (I think the Liberal Democrat price has been held up purely by the fact no constituency poll has been undertaken here, and will be a 3-way marginal) should be a better price than 15/8 with William Hill
• SNP in Lanark & Hamilton East, Livingston and Linlithgow and Falkirk East (the SNP had a strong 2nd place even in the 2010GE, I can’t see how they won’t win here given the consistent uniform swings taking place from Labour to SNP) available at 8/11, 8/13 and 8/13 with William Hill, respectively
• SNP in Midlothian (the incumbent Labour MP is standing down, taking any personal vote with her; swing should do the rest) available at 8/11 with William Hill
• SNP in Kilmarnock and Loudoun looks like a good bet to me too at 4/11 with Bet365 (only a 13.3% swing would be required for the SNP to take it, they’ve selected a local councillor and scored a strong 2nd place in GE2010)

It’s a rough and ready analysis, and I expect to be wrong, but not by too much. I’d be very surprised if the SNP seat tally fell outside a +/- 8 seat band off the analysis (between 32-48 seats) and am betting accordingly.

I will roll forward this prediction into my next post. Crucially, it means Labour start with a 26 ‘handicap’, and will need to take 26 seats in England and Wales just to stand still on their General Election 2010 result. It also increases the Labour-Conservative gap from 48 seats to 75 seats.

Interesting. More on that in my next post.

Could the Conservatives win an overall majority in the 2015 General Election next year? (PART 2)

Without a coalition this time? (image: courtesy of Reuters)

In my last post, I promised to focus on the seats the Conservatives would need to gain, particularly from Labour, to form a small overall majority. The purpose: to understand where there could be constituency betting value.

Crucial to this is understanding the seats the Conservatives are actively targeting. Since October 2012 it’s been a bit of an open secret that the Conservatives are planning a “40:40 strategy”. This envisages a battleground of 80 key marginal seats. The intent of Tory strategists is to ‘hold’ the 40 most vulnerable seats, and attempt to ‘gain’ the 40 most winnable of the rest to give them a majority. Note: that’s most winnable and not the 40 most arithmetically marginal. The target list has apparently been informed by those constituencies undergoing demographic change that favour the Conservatives, as well as other local factors such as MPs standing down who have a high personal (rather than party) vote.

There has been some debate online (and in the wider mainstream media) as to what the official list really is. There has even been discussion as to whether it’s shifting more “defensively”, to 48:40, or more “offensively” to 40:50. However, the Conservatives did focus all of their early candidate selections in 2013 in 40 marginal seats that very much look like targets. The selections focussed on 19 Liberal Democrat held seats, and 21 Labour held seats. That makes sense to me.

Here’s my list.

https://docs.google.com/spreadsheets/d/1r10eniZmywWwmC7SkoVtYBafDsWx6oBYi3xSKkLdsQk/edit?usp=sharing

To explain: I’ve used the UK Polling Report Conservative target seats (the 75 seats with the lowest percentage majorities over the Conservative party) as a base. I’ve then mapped the Conservative “40:40” targets to those – 33 of them can be read across. I’ve then added the extra 7 seats at the bottom – those with much larger arithmetic majorities (7 x Liberal Democrat, and 1 x Labour) to make up the full “40”.

A few other modifications: I’ve added my own view of a couple of extra targets that now look juicy for the Tories in the top 75: Taunton Deane, and Aberdeenshire West and Kincardine. At the very bottom of the list, I’ve added a further 8 seats (notionally much longer shots) to reflect the changed political climate since 2013. These include 6 x Liberal Democrat seats, and a further 2 x Scottish Labour seats; Dumfries & Galloway and Edinburgh South-West. That makes up a nice round 50.

Finally, I’ve highlighted the Labour held targets, added “Best Defender” and “Best Conservative” odds columns, and added my own view of the current likelihood of Conservative performance across the lot; the “CR (Casino Royale) prediction” column.

In order for the Conservatives to win a majority, they really have to first hold the line. They can probably afford to drop no further than 10 seats over the 306 they notionally held in 2010. That’s something like a (v.limited) loss of 3-4 seats to UKIP next year, and no more than 5-6 of the most hyper-marginal seats they currently hold over Labour. Clacton, Corby and (very likely) Rochester & Strood are goners to by-elections. So, they are already a bit behind.

If we assume that 10-seat handicap to be the case, the Conservatives then require 30 net gains to make their total up to 326, and achieve an overall majority of 2. A Liberal Democrat collapse might net them up to 18 seats.  That still leaves at least a further 12 to come from Labour.  The 40:40 candidates have been in place for over a year now, and will be actively campaigning with support from CCHQ. The Conservatives will heavily outspend Labour too. Labour have fewer resources, and are more heavily stretched; targeting a majority requires them to focus on at least 70 seats as well as defend from the SNP. So, if they do make any gains from Labour, they will probably be here. Scotland excepted, which is a slightly special case. More on that later.

The current Betfair odds on a Conservative overall majority are 5/1, so, for betting purposes, we should only really be looking at betting on Labour seats priced longer than this. However, there could be exceptions where a gain looks possible anyway.

Southampton Itchen is one such seat. This was held by John Denham in the 2010GE by a mere 192 votes. He’s been the MP for the seat for 22 years but is standing down next year, taking any personal vote with him. The new Labour candidate, Rowena Davis, has the CV of a classic Westminster political insider. Educated at Hampstead School, she read PPE at Oxford, and has worked as a freelance journalist and political commentator since graduating. She’s a sitting London councillor for Peckham and has faced criticism from within her own local party for having no links to Southampton. By contrast, Royston Smith, the Conservative candidate, has lived in Southampton all his life. He’s also a bit of a local hero following his wrestling to the ground of a gunman on board HMS Astute, in 2011, who had already killed one sailor. The Conservatives led Labour in the local elections here in May, and the Lord Ashcroft marginal poll in July 2014 had the two parties “tied” for votes. That was at a time when Labour was polling much higher nationally, and they have since declined significantly. The current 9/4 on the Conservatives aren’t the best odds in the world, but this feels like an evens toss-up to me. I’m on.

Looking at the other targets, some just don’t look do-able. It’s a bit of a fluke that Hampstead & Kilburn is top of the Tory list. The votes divided almost evenly between Labour, Liberal Democrat and Conservative last time. Although Glenda Jackson MP is standing down, this is the homeland of the North London intelligentsia and the Ashcroft marginal poll had a whopping lead for Labour. I expect this will be an easy hold.

Similarly, Morely & Outwood. Ed Balls was caught sleeping last time by a very well organised campaign, and extremely good candidate in Antony Calvert. He will have a much higher profile during the election campaign next time, as Shadow Chancellor, and ‘decapitation’ strategies of prominent targets rarely work. Probably a Labour hold. In Walsall North, the Conservatives appear to have been overtaken by UKIP and the current MP of 34 years (the Octogenarian David Winnick) is standing for election again next year. A comfortable Labour hold. Derby North was already a fairly evenly split three-way marginal, and probably a more centre-left leaning seat anyway. The Liberal Democrat defectors should see the incumbent home. Labour hold.

Bolton West, Wirral South and Telford are, on paper, all winnable. I haven’t spent too much time analysing these as the odds aren’t attractive. The local election results haven’t been very encouraging for the Tories, particularly in Bolton West, and neither have the Ashcroft polls. Nevertheless, all have been trending Tory over time, and the Labour majority progressively shrinking since 1997. If the Conservatives were to win a majority, they would probably pick these up. They would also surely retake Corby (priced at 3/1) which was picked up in a 2012 by-election,

I quite fancy Halifax. The Labour poll share has been chopped from 54%, 49%, 42% to 37% over the last four elections, although there were boundary changes for the 2010GE. The Conservatives didn’t drop too badly in the local elections, but it looks a tough nut to crack. The odds aren’t attractive here, but it’s a probable pick up if Labour collapse.  I also rule out Middlesbrough South and East Cleveland on the grounds of odds, although it looks an interesting and unpredictable seat.

I’m drawn to Newcastle-under-Lyme at 7/1. UKIP are actually priced shorter than the Conservatives here, at 11/2 with Paddy Power, but I like their candidate – Tony Cox. He’s a non-stereotypical Conservative, a maintenance engineer, and (from his profile) quite an active one. Labour haven’t advanced very far in the local elections, although UKIP have – a lot, but I think that running a tight campaign the Conservatives would win this, if they were on course for a majority. I’m on for a small sum.

My “tip of the thread” is Birmingham Northfield at 12/1. This seems to be a better prospect, now, for the Tories than Birmingham Edgbaston, which is probably Gisela Stuart’s for as long as she wants it. In Northfield, in the May local elections this year, there was actually a swing to the Conservatives from Labour. It seems the Liberal Democrat vote has swung behind the Tories, whilst UKIP are eating into the Labour vote. The incumbent MP of 22 years seems to have developed a reputation for being more interested in the Middle East than local issues. Meanwhile, the Conservative candidate, Rachel MacClean, has lived in the area for over 40 years, built a local business and looks very ‘normal’, having come into politics late in her career.  I’ve put on the maximum Ladbrokes would allow.

Of the longshots, I like Vale of Clywd and Delyn, priced at 12/1 and 14/1 respectively. It’s difficult to draw firm conclusions, since the last proper set of local elections were held here in 2012. However, the Conservatives did beat Labour in Denbighshire in the 2014 European elections. UKIP came a strong 1st in Flintshire (Delyn), and the Conservatives don’t have the most charismatic candidate in the world in Mark Isherwood, but both are trending Conservative over time. It’s also worth noting North Wales had above average swings to the Conservatives in 2010GE. These two North Wales marginals look tempting for a bet. Delyn even drops into the election forecast model occasionally, most recently as an 11% chance. But both are longshots, no question. Still, I’ve got a sum on as I reckon these would be picked up if a majority were on the cards. Gower is probably an equally long shot, but priced much shorter at 8/1. So not attractive at present.

The penultimate seat: Dumfries & Galloway. Scottish politics is very unpredictable and febrile at the moment.  However, this Scottish council area voted over 65% “NO” in the independence referendum, the 3rd most heavily in Scotland. There have since been signs of a Scottish Labour collapse. If these ex-Labour votes leach to the SNP, the considerable unionist vote may rally around the Conservative candidate. The price seems a snip to me at 8/1. I’m on. Edinburgh South-West – very long shot, but for similar reasons looks good at 12/1. It’s fairly middle class, and Alastair Darling MP announced he was standing down yesterday. Not sure how it’ll end up, but could be a surprise on the night.

That would complete the Tory path to a majority. There are several other routes too of course. It is by no means an easy one, but it isn’t the easiest one, so there should be some food for thought there. Sure, my analysis is full of assumptions. But I think there are some value bets there. What really lies behind it is the scenario where the Labour vote continues to splinter to UKIP, SNP and the Greens, or simply stays at home, and results in Labour achieving a poll-share worse than Gordon Brown in 2010 – see Part 1. If this happens, and is coupled with a rally of swing voters behind David Cameron who may pick him as PM out of fear of something worse, then a Conservative majority is perfectly possible.

A 25% shot feels about right, but we shall have to wait and see for May 2015 for the result.

The election is 6 months on Friday.

Could the Conservatives win an overall majority in the 2015 General Election next year? (PART 1)

Could this happen in a general election?

Labour have been having a torrid time recently. Last week, the leader of the Scottish Labour party resigned, accusing her Westminster colleagues of treating Scotland like a “branch office”. Yesterday, two Scottish Westminster polls were released. IPSOS-Mori had the SNP at 52% of the vote, suggesting Labour could be reduced from 41 to 4 MPs in Scotland next year.

In addition, there have been twelve opinion polls this month showing the Conservatives either tied with, or ahead of, Labour (hat-tip to ‘Rod Crosby’). The Conservatives also retook the lead from Labour in the daily YouGov Sun poll last night. There is increasing evidence of Labour losing support to the Greens in the “trendier” urban areas, to the SNP in Scotland, and to UKIP in some of its core northern bastions. And Ed Miliband’s leadership ratings are truly dire.

For an official opposition looking to retake power as a majority government in just over 6 months time this is not good news. The market’s reaction to all this (most notably on Betfair) has been for the price on ‘No Overall Majority’ to shorten sharply. They assess (correctly) that Labour’s chances of achieving an overall majority are starting to look very poor. If Labour dropped just 12 seats (net) in Scotland to the SNP, they would require 80+ gains in England & Wales to obtain an overall majority.  That would be the best performance by Labour from opposition in the last 80 years, apart from the two landslide victories they achieved 1945 and 1997.

However, simultaneously, the Conservative majority price has lengthened. It currently stands at over 5/1 on Betfair. This is partly understandable: Labour woe does not equal Conservative success. In particular, whilst a thumping SNP victory in Scotland would heavily damage Labour, it would not directly benefit the Conservatives. There’s a long way to go until May 2015. Plenty of things could trip the Conservatives up along the way too, not least of all Cameron’s nemesis: UKIP.

Cameron has not had a good time recently. He’s already lost one by-election in Clacton, and is on course to lose another in Rochester and Strood. He’s facing a demand for payment on a large bill from the EU, has a tricky vote to navigate in the House of Commons on the European Arrest Warrant, and, if he fails to satisfy his party’s restless backbenchers, may even face a leadership challenge.

But what if Cameron navigates all that successfully into the new year? What if “swingback” to the Conservatives, as the incumbent government, continues? What if Labour’s poll ratings continue to erode? What if the Tories manage to establish a clear poll lead by May that enables them to win an overall majority?

It’s a tall order, but this isn’t complete fantasy. Lord Ashcroft’s Polls show some interesting underlying trends in opinion. His national poll this week showed that swing voters trusted the Tories to manage the economy in the best interests of Britain by 50% to 19%. UKIP voters did so by 56% to 17%.  In addition, his post-conference season poll on 12th October showed that by 63% to 37% all voters are either satisfied with the job David Cameron is doing overall as Prime Minister, or were not satisfied, but would still prefer to have him as Prime Minister over Ed Miliband.

This could all start to tell. It suggests that if the Conservatives can make the election about the economy and leadership, and a clear choice between themselves and Labour, they stand a chance of winning it. The latest UK general election forecast from Stephen Fisher assesses the chance of a Tory majority at 27%; significantly higher than the chances of Labour majority at 19%. I think the betting markets have the odds of a Labour and Conservative majority the wrong way round.

The question for punters – interested in possibly capitalising on this – is which is better value: betting on the overall election result, or in the various constituency markets?

One area I feel’s been overlooked (so far) is the prospect of the Conservatives making seat gains directly from Labour. The focus has tended to be upon the more obvious gains that are there to be made from the moribund Liberal Democrats. However, unless the Liberal Democrats almost entirely collapse in the Conservatives favour, and they suffer hardly any losses to any other party, the Conservatives will almost certainly have to win some seats from Labour in order to achieve a small stable majority.

But will they win any?

The short answer: very possibly. In my next post, I will explore this in more detail.

Is it worth betting on an EU referendum during the lifetime of the next government?

Welcome to my new blog. This first post is a bit of an experiment.

The Conservatives, under David Cameron’s leadership, have pledged to hold an EU in/out referendum during 2017 if they win the next general election. Indeed, Cameron has pledged, “I will not become prime minster unless I can guarantee that we can hold that referendum.”

That leaves him little room for manoeuvre. Even if the Conservatives fail to win an overall majority next year, if David Cameron wants to stay PM in any guise he will be under immense pressure to deliver this. Anything less, and he simply won’t survive as Conservative leader.

Today, another interesting development took place. The Conservatives second attempt to enshrine an EU referendum into law by the end of 2017 has cleared its first parliamentary hurdle.

Although there isn’t much time left, only around 6 months, this private member’s bill could become law before the General Election. If it does, it will create a legally-binding obligation to hold a referendum by that date.

The House of Lords did scupper similar legislation earlier this year, when it ran out of time amid Labour and Liberal Democrat opposition. However, crucially, because this is now a new parliamentary session, and the Lords can only delay bills by one year, it is possible that if it fails again it could be rammed through into law by use of the Parliament Act. The fact that several Labour MPs spoke out against it today, but did not vote against it, is perhaps indicative that this is a battle which they’re choosing not to fight this close to a general election.

All of that makes this bet at William Hill that an ‘EU in-out referendum takes place during the lifetime of the next government’ look very interesting. The odds are 11/4 for YES and 1/4 NO. Very roughly: a 25% and 75% chance, respectively.

If the Conservatives are in government after the General Election next year and (Betfair currently makes it ~40% chance they’ll be ahead on seats) then by hook or by crook Cameron will need to make this happen, or lose his job. That could be through a second coalition with the Liberal Democrats, even earlier in 2015 through a confidence and supply deal with UKIP, or possibly via a Conservative minority government. Cameron could simply dare the other opposition parties to vote it down and face the electoral consequences. They might easily prefer to abstain instead, allowing it to pass.

Of course, if it becomes law, the referendum *must* happen by the end of 2017 regardless. There’s also an argument that the narrative on the UK holding an EU referendum has now built up such a head of steam, with public expectations to match, that even a Labour government – particularly if it’s in a minority itself – might perhaps feel obliged to offer one.

Now, we have to be slightly careful here. The “next government” and the “next parliament” aren’t necessarily the same thing. The Fixed-Term Parliament Act 2011 means the next parliament will run for the full five years from 2015-2020 unless the Commons votes with a 2/3rd majority to dissolve it early, or the government falls in a no confidence vote. However, if a ‘loose’ Conservative minority government is formed and, say, falls after 6 months it is possible the government could switch to another (for instance, a Labour minority, or Labour-Liberal Democrat coalition) within the same parliament, *and* without an election, before this referendum has been held. Hills might then either declare this bet null and void, or call it as a “no” – and it loses – even if one subsequently takes place.

However, I think that’s a fairly small chance. This is still a good bet. This referendum is coming; it’s only a question of time. The odds look like value to me.

I’m on YES with £25. I’m feeling pretty confident I’ll collect.