Labour is in a better position on the economy than many think

The political-media establishment consensus is Labour will have a hard time establishing credibility on the economy until it gets to grips with deficit reduction.

The first part of that equation is true, the latter part not necessarily so. More likely than not, it is the government that will lose support of the electorate and push more people to give Ed Miliband a chance. As the saying goes: governments lose elections, oppositions rarely win them.

Let’s be in no doubt: Labour has a long hard slog ahead. But recent trends show this may not be as difficult as some think.

I won’t get into how Labour could improve its ratings on the economy here, but there is one key metric Ed Miliband has to get to grips with.

That metric is whether Ed Miliband can be trusted to take difficult decisions. To show he is capable of doing so, he has think big, symbolic and unexpected. He also has to take decisions that throw up a national debate not just a Westminster-centric one.

Without the trust that he can be bold to do what it takes to sort out the economy, voters won’t put their faith in either of the Eds.

But a bigger part of the equation is dependent on what the government does. And this is where they’re in serious trouble.

The chart below tracks voter sentiment over the last year. Even before the budget it was heading in the wrong direction.

Osborne had to introduce stealth taxes and annoy a large chunk of the electorate for good reason: the economy isn’t growing. He has to find the money from somewhere, and he’s cut spending for the poorest as far as he can without inviting riots on the streets.

He has been criticised vociferously by Conservatives for the cack-handed way he introduced the granny and pasty taxes, but they assume such debacles can be avoided in the future.

But they’re living in fantasyland. Every projection says the British economy won’t grow over the next few years. Worse, real incomes are going to decline as Osborne relies ever more on consumer spending to resuscitate the economy.

To be blunt: short of an economic miracle, the Labour party leader won’t face a shortage of material on the economy to attack the government over. The Coalition itself is also likely to get more strained as they fight over a shrinking pie to appease two different sets of voters.

Ed Miliband has more room to be bold and maneuver on the economy than many think.