Public understanding of economic principles will decide 2015 election

AS 2013 begins, George Osborne, Ed Balls, and Danny Alexander should look at the polls with a mix of depression and hope. Depression, because despite all the coverage of their efforts, the public remains completely divided and confused on economic policy. Hope, because there is everything to play for and a politician who takes a risk with a different approach can secure political advantage.

YouGov’s December polls showed the following: by 77 per cent to 4 per cent people think the economy is bad; by 62 to 30 per cent, people think the government is mismanaging the economy; by 60 to 26 per cent that spending cuts are being done unfairly; and by 44 to 13 per cent that cuts are being made too fast. But the same polls show by 56 to 31 per cent that people think they are necessary. The public therefore simultaneously thinks the government’s economic policies are wrong and right.

This should not come as any real surprise. After all, amid a massive and complex economic shock, no senior politician regularly explains the fundamentals of their economic policy to the public. No politician consistently returns to first principles to explain how we got into this mess, what an acceptable outcome looks like, how we get there, and a realistic timetable.

Politicians have generally played an inside Westminster game, jumping on positive or negative data, and piling into each other on big days in Parliament. The polls show that this approach is not working. There is a knowledge gap in the public mind that means they are not processing all the news that reaches them. The economic debate is passing them by.

Politicians are rightly wary of complexity. People make political decisions primarily based on emotional judgments, not reason, even on apparently rational issues like the economy. They make decisions based on feelings about competency, fairness, and trust. Economic realities count, but busy people ultimately make judgements on their perceptions of reality, not just objective facts. Perceptions of the economy will determine the next election.

But the parties cannot hope to move people emotionally through simple arguments unless they establish a framework to help the public understand their economic policies. The government will struggle to project a sense of competence if the public has no concept of government debt and why it is bad. Labour will struggle to portray the government’s policies as incompetent and unfair if the public has no concept of why spending during a recession makes economic sense.

Politicians will only win the economic debate when they take a risk by raising its quality. City A.M. has been calling for better financial education. This is right and politicians need to start this process now, doing the equivalent of taking the British public back to school. Politicians need to accept first that the basic economic concepts they take for granted are not understood by the public, and second that these concepts must be understood for all their other communications to make sense.

What does that mean in practice? Above all it means hitting the reset button by finding opportunities for major events and big speeches that go back to first principles on the economy and that explain these basic concepts to the public – debt for the government, growth for Labour. It also means the creation of “perfect paragraphs” on their fundamental approaches to economic policy that can be front-loaded into all their public communications.

Agree with him or not, the person that probably got this approach most right in recent times was US economist Paul Krugman. On his autumn visit to the UK, he articulated an approach that touched on serious economic policy but that also made sense to a popular audience. His argument that the government was mad to push austerity in a downturn – regardless of its merits – was compelling. It was particularly so given the absence of a clear alternative articulated by domestic politicians.

Will such an approach work? With the ludicrous ban on political advertising on TV, it is harder than it might be. But I believe that it can work. Polls show that the economy is by far people’s biggest concern and they are still paying more attention to economic and business news than before. What is clear is that it is not credible for the government to continue to inflict serious economic pain on the public without a real explanation. Perceptions will be everything in 2015.

James Frayne is a communications strategist and a former government director of communications.