Had Theresa May come back from her Easter walking holiday and decided against holding a general election, few would have blamed her. Going to the country on 8 June was always a gamble, as has become evident the longer the campaign has gone on.

Consider the reasons for caution. It is mid-term when governments tend to be unpopular. The public is sick of politics after the 2014 Scottish referendum, the 2015 general election and last year’s EU referendum. May had a workable majority and had vowed to go the distance.

What’s more, there were solid economic reasons to let things be. The recovery from the deep slump of 2008-09 has been the weakest in living memory. There has been no productivity growth and wages are lower than 10 years ago. The 1970s was thought of as the most dismal decade for the economy since the second world war but the 2010s now hold this unwanted accolade. In terms of what’s happened to living standards, it isn’t even close.



Confronted with the strong evidence that economic policy since 2010 has been a failure, May’s response has been to offer more of the same. Deep welfare spending cuts are designed to balance the books, and would help do so if the Bank of England was in a position to respond with cheaper borrowing.

But that can’t happen because interest rates are at 0.25% and can’t go lower. As a result, welfare cuts suck spending power out of the economy. That leads to slower growth, which explains why it will now take until the middle of the next decade under Conservative plans to run a budget surplus.

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Presumably, sticking to a deficit-reduction plan that isn’t working fits with May’s “strong and stable” mantra. But, in truth, the wrong mix of monetary and fiscal policy has left the economy weak and unstable. Weak because investment and productivity have been so poor. Unstable because growth has been so heavily reliant on debt-driven consumer spending.

The “strong and stable” May has performed two U-turns in the past three months: on the budget plans to increase national insurance contributions for the self-employed and on the manifesto’s proposed dementia tax. A third U-turn – relaxing fiscal policy (cutting taxes or raising spending) so that monetary policy (interest rates) can be tightened would make a lot of sense and is long overdue.

As the Institute for Fiscal Studies pointed out last week, government resistance to changing its macro-economic approach will inevitably lead to increased financial pressure on the NHS. Although health has been exempt from the deep cuts that have affected most other Whitehall departments since 2010, the settlements have been nugatory by historical standards. Real spending has risen on average by 4% a year since the mid-1950s. In the 18 years of Conservative rule between 1979 and 1997, it increased by 3% a year. On current plans it will increase by 1.4% a year between 2010 and 2022. (Labour’s plans are, incidentally, not a lot more generous. They would involve annual increases of 2% a year).



When the consultancy firm Oxford Economics put the economic plans of the three main parties through its model it concluded that the continuation of austerity under the Conservatives would lead to stable although unspectacular growth averaging 1.9% a year over the course of the next parliament.

By contrast, the consultancy noted that “the more expansionary policies proposed by Labour and the Liberal Democrats would offer better outcomes in terms of GDP growth and allow monetary policy to be normalised sooner, without putting the public finances under strain.” More specifically, the economy would be 1.9% bigger under the Lib Dem plans and 1% bigger under Labour’s plans than under the Conservative plans.

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Higher growth under Labour and the Lib Dems would be the result of abolishing the 1% cap on public sector pay, an increase in public sector employment and plans to boost spending on public infrastructure by 50%. The claim by the Conservatives that higher borrowing would lead to much higher deficits and an explosion in the national debt is dismissed by Oxford Economics as the pre-Keynesian nonsense it is.

“Our scenarios demonstrate that higher levels of capital and current spending could be accommodated without putting the public finances under undue strain. Therefore, in our view it is very difficult to argue that the macroeconomic benefits offered by the more austere Conservative plans are anywhere near large enough to offset the opportunity of stronger growth offered by the plans of the Liberal Democrats or Labour.”

To sum up, May called an election when there was no need for one, when the public didn’t want one, when living standards were falling, when the economy is dysfunctional, when the strategy of the past seven years has demonstrably failed, and when there is a viable alternative.

Despite all that, there were reasons for May to take the bold approach. One was the experience of Gordon Brown, who would almost certainly have won an election in the autumn of 2007, when the financial crisis was in its infancy. A second was that many voters remain doubtful about the idea of higher borrowing even when it pays for itself. A third was that no matter how tough life is and no matter how tough it might get, the May calculus was that the public would assume it would be even tougher under Labour. She saw the opportunity of a presidential election in which she would be a handbag-wielding, Brussels-vanquishing Margaret Thatcher figure up against Jeremy Corbyn’s Michael Foot.

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The idea was to keep the focus on the need to have a “strong” prime minister to deliver Brexit and – as far as possible – divert attention from the government’s less than impressive economic record. When the economy did move centre stage, the plan was to brand Labour as the party of reckless borrowing and ideologically-driven nationalisation.

In the first couple of weeks of the campaign, the May strategy was a storming success. The Conservatives were streets ahead in the opinion polls. There was talk of a landslide that would see the Tories beat Labour in Wales.

But as the weeks have gone by, Labour has done better. Corbyn is better on the stump than May. The prime minister’s rapid U-turn has raised doubts about whether she will be Mrs T redux in the Brexit negotiations. Finally, austerity fatigue and a leftward shift in public opinion on issues such as inequality and nationalisation, meant Labour won the battle of the manifestos.

There are still 10 days until the election, a long time in politics. The polls suggest May will still win and she could still get her landslide. But if the majority is 50 rather than the 150 seen as possible earlier in the campaign, it will be a pyrrhic victory.