How Labour can regain its trust on the economy again (LC poll)


by Sunny Hundal    
10:45 am - January 31st 2011

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The lessons that Labour takes from the financial crisis is an ongoing battle – against the Tories and within the party too.

The argument made by many on the Labour right is that unless the party regains trust on being competent with the economy again, it won’t return to power. This is true. But the real question is how it lost that trust and what lessons we can learn from that.

I commissioned our own polling for Liberal Conspiracy to show how this case is made badly with existing polling, and how limited questions suit a specific agenda.

Most voters blame Labour for the financial crisis – around 50% of the electorate did so just after the election in 2010.

This is cited by many on the right to say that Labour for Labour to regain economic credibility, it should accept the need for deep cuts and occupy the centre ground that Cameron currently inhabits.

The problem with such polling is that it limits answers to only political parties. Of course Labour is to blame – Conservatives or Libdems weren’t in power in 2008.

We commissioned One Poll to ask a similar question. But we also included Banks and Trade unions into the mix, along with ‘other global factors’.

Results of our poll
Who is responsible?

Apart from Conservative voters, most blame the Banks for the financial crisis rather than Labour.

One Poll is not a member of the BPC but I’m willing to bet the results will be similar across other pollsters.

The point is this: a significant percentage of voters lost trust with Labour on the economy – not because it didn’t have a “tough” (as Alistair Darling called his) deficit-cutting plan.

Many lost trust in Labour’s handling of the economy because it didn’t regulate banks properly, and let them take the economy down. They blame the banks for the financial crisis, but Labour for letting the crisis happen in the first place.

These people are a significant majority of the voters. How will Labour respond to them? That should be the main question for the party now.

To reinforce that point, here is a tracker poll from YouGov.

Voters initially gave the government a chance, but the trend over the past six months is clear: they’re not buying the deficit reduction plan as the solution.

Unless Labour emphasises an alternative vision (and to his credit Ed Balls did that repeatedly yesterday on Andrew Marr’s show) – the party won’t won’t have anything to offer voters.

Labour cannot win back trust on the economy with voters until it admits (repeatedly) that it failed to regulate banks and financial institutions properly, and lays out a bold plan to prevent that happening in the future.

[update: Tables for the poll question are now here]

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


I think you could do with adding some overall results to the table to make it easier to put into context. So for example; 857 (34%) think it was labour that caused the crisis ahead of the banks/global factors. Which is unfortunatly still large enough to be a problem.

Interesting conclusions but I think you could have presented your findings a bit more clearly. The table’s quite hard to read, so stating your key findings would have made things a lot easier. Otherwise, right on the money.

This is absolutely the issue for Labour. It is frightened that by admitting that it was insufficiently willing to regulate banks it will make itself look weak. But by continuing to claim that it did no wrong, and if it did, then no serious wrong, it just looks like it’s in denial. Banks will inevitably push the envelope of regulation, just as F1 teams will keep bolting new stuff on until the rules say they can’t, because it’s the nature of the beast. It’s the responsibility of regulators to rein in the worst excesses, and Labour was too willing to accept at face value banks’ claims for the marvels of market-based regulation. Until that admission is made (and it’s going to be hard for Balls, who was at the heart of the failure, but will come best as a mea culpa from Balls _before_ he was at the heart of the failure) then Labour are left attempting to defend the indefensible. Claiming, accurately, that the Tories were as bad doesn’t help: they were in opposition and it wasn’t their responsibility, and everyone says things in opposition that come to haunt them in office. Labour were in office, for thirteen years, with benign economic conditions and a working majority, so their failure to put suitable regulatory frameworks in place is theirs and theirs alone.

I just don’t see how this polling data is fine-grained enough to support the case you’re making.

I’m sure it’s true that “Many lost trust in Labour’s handling of the economy because it didn’t regulate banks properly, and let them take the economy down. They blame the banks for the financial crisis, but Labour for letting the crisis happen in the first place” – but the data doesn’t identify that group of people. Some of them will have said Labour is most responsible for the state of the economy (reasoning that the buck stops with the Government), others will have said banks are most responsible (reasoning that the immediate cause of a problem is the thing ‘most responsible’ for it).

What’s more, the Tories and right-wing press have done their damnedest to convince people that the banking crisis is a side-issue, and the real root of the problem is Labour’s ‘uncontrolled spending’. What about people who’ve been taken in by that? They might blame Labour for the state of the economy, but for reasons that have nothing to do with a failure to regulate the banks.

Finally, it just doesn’t follow from the fact that many voters “lost trust with Labour… because it didn’t regulate banks properly” that those voters don’t now believe that a “tough deficit reduction plan” is needed. Logically, 100% of people could believe both that the banks are wholly responsible for the state of the economy, and that a tough deficit reduction plan is now the only way to clear up their mess.

Isn’t the very title of this article an oxymoron?

6. luis enrique

one thing they could do is really get behind The Vickers report, particularly those radical aspects of it that the Conservatives won’t implement. That’d add some credibility and put some distance between them and the government. I don’t know what the report will recommend, but there’s a good chance Labour will be able to say “we’d do it” whilst the government will not.

SH: “Labour cannot win back trust on the economy with voters until it admits (repeatedly) that it failed to regulate banks and financial institutions properly, and lays out a bold plan to prevent that happening in the future.”

I go for that – but every time Ed Balls pops up to slam Gideon Osborne, that’s a reminder of who was the architect of the failures in economic policies and the ensuing consequences for the housing market.

IMO Labour also needs to clarify how the banks find the wherewithal to pay out those huge bonuses to their staff:

Alan Greenspan referred to one reason in his testimony on 24 October 2008 to the US House of Representatives Oversight Committee:

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”
http://online.wsj.com/article/SB122476545437862295.html

Here are some others in the news:

- Mis-selling securities in markets with gullible potential clients where information asymmetries are rife:

“The Financial Services Authority has hit Barclays (BARC.L) with a record 7.7 million pound fine for mis-selling two income investment products to more than 12,000 clients who lost money during the financial crisis.” [January 2011]
http://uk.reuters.com/article/idUKLNE70H03B20110118

- Insider dealing:

“The Financial Services Authority (FSA) today charged seven people with 13 charges in respect of conspiracy to deal on inside information obtained by the defendants from two major investment banks.” [March 2010]
http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/059.shtml

- Undisclosed conflicts of interest:

“Goldman Sachs apparently failed to declare a potential conflict of interest which resulted in pushing up the cost of a £23.5billion bail-out of Lloyds Banking Group, City sources claimed last night. The allegation that the Wall Street bank may have put its own interests ahead of its British clients comes just a week after it was accused of fraud in the US.” [April 2010]
http://www.dailymail.co.uk/news/article-1268378/Goldman-Sachs-conflict-inflated-Lloyds-bail-costs.html

In other words, the high earnings paid to bankers are because the usual rules and laws of market capitalism are ignored.

Don’t overlook that the banking commission chaired by Sir John Vickers will be reporting later this year.

planeshift, the data can’t be turned into percentages straight – because Conservatives are over-represented as a proportion.

But then the question is, do you proportion them according to how the election results turned out, or according to where the polls are now?

We’ve chosen to keep the groups separate so you can see how different groups, taken separately, see what caused the financial crisis.

Ok that is fair enough. Perhaps the more interesting group would be if you could identify people classed as “floating voters who live in marginal constituencies” and examine their opinions – because unfortuantly this is the group who count.

10. Anon E Mouse

Sunny Hundal – Why doesn’t Labour just admit it screwed up, blame Gordon Brown and move on.

Ed Balls just looked shifty on Andrew Marr…

11. Roger Mexico

Sunny

OnePoll don’t seem to have a proper archive – which is fair enough, nearly all their stuff is consumer and press coverage is more important. I wonder though if we could see the tables, methodology and weighting, fieldwork dates etc for the few sad people like me who care about these things?

They certainly have go a decent sample size and seem to have weighted for vote at the general election (though using UK including Northern Ireland rather than just Britain as other pollsters do).

YouGov have asked various similar questions since the GE and I’ll see if I can dig out some tracking data tonight.

For what it’s worth, I think you’re right about Labour’s need to have an alternative, though I think it applies to the deficit as well as financial control. However many voters believe control of the banks etc is impossible without international agreement and of course that’s more difficult to convincingly promote as an opposition.

Sunny Hundal – Why doesn’t Labour just admit it screwed up, blame Gordon Brown and move on?

Well, it’s not enough to say ‘we were wrong’ is it? You need to have the second half of the equation – ‘what we should have done was…’ where the ellipsis is filled with something rather more specific than ‘regulated the banks better’.

The other problem with this line of argument is that neither Ed really seems to think that Labour did get anything seriously wrong. It’s possible to reverse public opinion on things like this, but it really isn’t easy.

“t neither Ed really seems to think that Labour did get anything seriously wrong.”]

I think they do, they just fear an answer of “better regulation to reign in excessive risk taking in the financial industry” will be interpreted as old labour and alienate middle england voters.

Also the lesson of Cameron is that opposition parties shouldn’t put detailed policies in the public domain prior to elections – it loses you support. The announcements of actual policies probably lost Cameron his majority, and if he had been honest about the policies done over the past year then he would still be in opposition.

The glaring missing category when asking people to apportion blame is of course, ‘ you ‘. They think of banks, credit and the economy as abstract concepts divorced from themselves. Labour would be making a big mistake if they developed an economic policy based on argumentum ad populum. The consensus is an echo chamber and is nearly always wrong. So called ‘ common sense ‘ is not common. Most good ideas that lead to good policy especially when it comes to economics are counterintuitive. If sense had any value it would be rare not common. People think of their own lives as existing within a bubble and especially in bad times have profoundly bad ideas of good economic policy.

The Labour Party in a democracy have to formulate policy that appeals to voters so they do have to be popular. However, I think it would be dangerous for them to adopt policies just because that is what people believe. They like all the other parties should stop being so insular and develop policies based on what works elsewhere.

This is a good blog post by Bryan Caplan discussing how bad ideas become bad policies and bad outcomes. Moreover, invariably politicians do not learn from mistakes, they double down on them and make things even worse.
http://www.econlib.org/library/Columns/y2004/Caplanidea.html

15. Chaise Guevara

@ 14

“The glaring missing category when asking people to apportion blame is of course, ‘ you ‘.”

Generally true. Although when I told my mum that her generation had sold mine up the river her attitude was basically “mea culpa”.

YouGov have asked various similar questions since the GE and I’ll see if I can dig out some tracking data tonight.

They’ve only done polling with the political parties as possible answers.

So this means people blame Labour, some of whom because of what they see as the structural deficit (from the right) and many more for not regulating banks properly (from the left).

So people use that poll to make up their own minds – this is why we wanted to commission polling specifically asking about banks too.

“floating voters who live in marginal constituencies” and examine their opinions – because unfortuantly this is the group who count.

Not always. For Labour to get a 29% share of the national vote – they must have pissed off a lot of their own voters too.

I think they do, they just fear an answer of “better regulation to reign in excessive risk taking in the financial industry” will be interpreted as old labour and alienate middle england voters.

Not at all. Ed Mili’s speech at the Fabian Society annual conf said exactly this. He has said it repeatedly. Proper regulation isn’t a taboo any more. Its just there are no solid proposals that have come on the back of that.

It’s important to note that inadequate regulation of banks and the financial system was NOT a uniquely British issue. There were also regulatory failings of American banks – hence the US government bailouts there – and in Ireland where the scale of the bailouts has badly damaged the economy.

Readers may like to see the review of the UK’s Financial Services Authority by Lord Turner, the FSA chairman, published in March 2009:
http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/037.shtml

Readers may also like to note this forerunner in America of insolvency problems of financial institutions:

“The US Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. More than 1,000 savings and loan institutions (S&Ls) failed in ‘the largest and costliest venture in public misfeasance, malfeasance and larceny of all time.’ The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the US government, which contributed to the large budget deficits of the early 1990s.”
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

An interesting issue is about why the regulatory failings of banking systems were so much greater in America, Britain and Ireland as compared with most other west European banking systems.

18. alienfromzog

Interesting stuff. I have two significant questions to ask of any financial experts available. Firstly the primary issue was with US banks. So even if UK banks were ‘perfectly’ regulated, would we really be any better off as we would still have had a recession like the rest of Europe and much of the wider world did? Secondly, would it have actually been politically possible for a Labour government to introduce tighter regulation when so many on the right and in the financial sector repeatedly claiming it was too tight and preventing growth in the sector?

Britain has a larger current budget deficit as a percentage of national GDP than any other affluent country – the exception is Ireland:
http://www.economist.com/node/18011838?story_id=18011838

A budget deficit of that magnitude is unsustainable because of the scale of borrowing required to fund it. The question is how did we get to this position since – importantly – prior to the crisis, public spending as a percentage of GDP was not inordinately high as compared with other west European countries? This is the assessment of Martin Wolf, chief economic commentator of the FT and a member of the banking commission chaired by Sir John Vickers:

“Can we not at least blame Mr Brown for the bloated public spending and grotesque fiscal deficits? Yes, but also only up to a point. Between 1999-2000 and 2007-08, the ratio of total managed spending to GDP did rise from 36.3 per cent to 41.1 per cent. But the latter was still modest, by the standards of the previous four decades. The jump to a ratio of 48.1 per cent, forecast for this year in the 2010 Budget, is due to the recession. Nominal spending is currently forecast at 3.5 per cent higher in 2010-11 than forecast in the 2008 Budget. But nominal GDP will be 10.3 per cent lower and tax revenues 16.4 per cent lower. Critics of his fiscal policies were right, but the error was far larger than anybody imagined. It is true, however, that Mr Brown must take a share of the blame for Labour’s failure to ensure the extra spending would be well managed.”
http://www.ft.com/cms/s/0/3074d7ba-5ec0-11df-af86-00144feab49a.html

Britain’s fiscal problem was partly due to a collapse of exchequer tax revenues in consequence of the liquidity problems of the banks and other financial services which had become a larger proportion of the UK’s national economy than of other west European economies.

In the good times, when the banks were bounding along and a consumer debt mountain of £1.3 trillion was piling up, the buoyant tax revenues generated by banks and financial services funded the extra spending on public services – spending on the NHS tripled during the New Labour governments 1997-2010. Btw only London and the South East regions were generating net receipts for the national exchequer – for other regions, public spending was larger than the tax revenues they generated.

My post @7 and the Turner review linked @17 touch on some of the main reasons why banks and financial services were under-regulated. The Vicker’s commission is also focusing on the implications of a pervasive pre-crisis belief that no government would allow Britain’s banks to fail, a belief which led to banks being able to borrow more cheaply than they otherwise could and to them making more risky lending decisions – such as 100% mortgages and better.

See this from Robert Peston on BoE estimates of the value to the big British banks of state guarantees for their debts:
http://www.bbc.co.uk/news/mobile/business-12022260

“The Bank of England estimates that in 2009 alone, the big British banks collectively received a subsidy from taxpayers of around £100bn. And the subsidy in 2008 was around £50bn. . . As currently constructed, our four big banks would not have much of a business without that taxpayer subsidy. . . So if the chancellor and business secretary were to say, in this way, that taxpayers were no longer standing behind all the debts of banks, the price of borrowing for banks would rise very sharply, in the best case for banks. And in a worst case, the big banks would not be able to refinance all that debt maturing in the coming year and they would be kaput.”

An alternate vision then more of the same bullshit when in power. That would be a big surprise wouldn’t it.

“An alternate vision then more of the same bullshit when in power”

It’s important to assess what exactly the policy failings were. General political abuse and mudslinging are absolutely useless for reforming regulation and making better policy decisions. Much of the diagnostic analysis is fairly technical – which is presumably why the coalition government set up the Vickers commission on banking

There should have been an option to blame Gordon Brown. He is the main reason for our troubles


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    How Labour can regain its trust on the economy again (LC poll) http://bit.ly/gpNa7s

  2. cdrfuzz

    How Labour can regain its trust on the economy again (LC poll) | Liberal Conspiracy http://t.co/C2l7mjh via @libcon

  3. sunny hundal

    Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  4. Ma

    RT @sunny_hundal: Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  5. William Martin

    RT @sunny_hundal: Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  6. Captain Disco

    RT @sunny_hundal: Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  7. sunny hundal

    Other polling also shows public losing faith that government plans will work. Listen to them Labour! http://bit.ly/gpNa7s

  8. House Of Twits

    RT @sunny_hundal Other polling also shows public losing faith that government plans will work. Listen to them Labour! http://bit.ly/gpNa7s

  9. Jan Bennett

    RT @sunny_hundal: Other polling also shows public losing faith that government plans will work. Listen to them Labour! http://bit.ly/gpNa7s

  10. Stephen Lintott

    RT @sunny_hundal: Other polling also shows public losing faith that government plans will work. Listen to them Labour! http://bit.ly/gpNa7s

  11. Michael Bater

    How Labour can regain its trust on the economy again (LC poll) | Liberal Conspiracy http://t.co/9Vm5WEB via @libcon

  12. Christy Quinn

    Worth reading- How Labour can regain its trust on the economy again (LC poll) | Liberal Conspiracy http://t.co/DoBkUhU via @libcon

  13. Emily Davis

    RT @sunny_hundal: Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  14. Marcus A. Roberts

    RT @sunny_hundal: Polling for LC shows most blame Banks than Labour for the economy. That has lessons for future http://bit.ly/gpNa7s

  15. Marcus A. Roberts

    RT @sunny_hundal: Other polling also shows public losing faith that government plans will work. Listen to them Labour! http://bit.ly/gpNa7s

  16. OnePoll

    OnePoll/Liberal Conspiracy poll shows more blame Banks than Labour for the economy http://bit.ly/gpNa7s

  17. Oliver Conner

    RT @OnePoll: OnePoll/Liberal Conspiracy poll shows more blame Banks than Labour for the economy http://bit.ly/gpNa7s

  18. Steven Fielding

    A different way 4 Labour 2 regain 'trust' on the economy: http://t.co/LrLriaE; regulate the banks, sure, but it'll still have to cut, right?

  19. Tax Research UK » Of course people don’t blame Labour for the economic crisis

    [...] Liberal Conspiracy have done someone fascinating polling. [...]

  20. Tim Horton

    OnePoll finds nearly half of people blame the banks or 'global factors' for the economy; just one third blame Labour http://bit.ly/ejENEH

  21. Tim Horton

    OnePoll finds just 1% blame the unions for the economy, six times less than those blaming the Tories http://bit.ly/ejENEH Nice try George…

  22. Rocky Hamster

    How Labour can regain its trust on the economy again (LC poll) | Liberal Conspiracy http://t.co/4DegjWl via @libcon

  23. An inside look into media research trends | Paratus Communications

    [...] There is a current thirst amongst the political blogosphere for research-based stories to back up their posts and rival the dailies for robust news content. As news consumption habits fragment and news delivery channels expand, blogs and social media platforms are beginning to rival traditional news outlets in their ability to break robust and meaningful stories. As such, the political blogosphere is looking to market research based PR to add strength and authenticity to its posts – Liberal Conspiracy’s attempt to shine a light on how Labour can regain public trust in its ability to control the economy. [...]





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