A post in April last year described an economic model of UK voting intentions. This model suggested that the Conservatives would move into a 1-2 percentage point lead over Labour by the May 2015 general election, based on a plausible economic scenario. Updating the inputs, it continues to predict a 2 point Tory advantage by May but indicates that the gap would rise to 6 points by end-2015 in the absence of an election, as the economic backdrop continues to brighten. Conservative hopes of victory rest on persuading voters to give them credit for prospective as well as current good news.

The model is designed to predict the poll differential between the main government and opposition parties based on economic factors. It was estimated on ICM-Guardian poll data extending back to 1984. The poll differential depends positively on average earnings growth and house price inflation, and negatively on the unemployment rate, inflation and interest rates (Bank rate). More details are available in the previous post.

The Conservative-Labour differential swung from -3 percentage points in the January ICM-Guardian poll to +4 points in the February poll released this week. The model suggests that the latter result is an outlier and the “true” differential is currently -1 point – see chart. The Tories, however, are predicted to move into a 2 point lead by May, based on key assumptions that average earnings growth rises to 2.5% by then and consumer price inflation remains below 0.5%.

The problem for Conservative strategists is that the earnings pick-up may be occurring too late to swing the election result. The Bank of England expects earnings growth to rise further to 3.5% by late 2015. With inflation projected to remain low and unemployment to continue to decline, the Bank’s forecast implies that the Tory lead would widen to 6 points by end-2015 in the absence of an election, according to the model. A 6 point advantage in May would ensure a return to power.

The Conservatives are finally benefiting from an improving economy but their challenge is to convince voters that the recent recovery in real earnings is the start of a sustained upswing, for which they should receive electoral credit now.