Voters are too insecure to feel good

Whatever happened to the feel-good factor? It has been taken as gospel by politicians that if the country is prosperous and the voters' spending power is rising, as is the case, then the government that has brought this about will be re-elected. This is one reason why John Major has deferred calling the election until he is within weeks of the completion of his five-year term. He has wanted to give the maximum time for the economy to rebound from the last recession and to grow so that voters would feel ever more cheerful and re-elect the Conservatives for reasons of prudence, if no other. Indeed the main objective of the Chancellor of the Exchequer, Kenneth Clarke, has for some time been to create a backdrop to the election in which the economy is expanding (it is), unemployment has fallen substantially (it has), inflation is subdued (never more so) and house prices are buoyant (another tick).

The actual situation is not just that recovery from recession is complete but that the British economy is better placed than it has been for a long time. If you look more broadly than at the statistics for growth, inflation and personal income, you see that in infrastructure, in the education and flexibility of the workforce, in the skills of management, in efficiency of public services, the United Kingdom has closed much of the gap with its international competitors. According to the Social Market Foundation, in a study published yesterday, the UK's economic decline relative to other European countries may have ended.

This is an achievement for Conservative management of the economy since 1979, and of historic importance. It does not rank with winning the Second World War, but it is big. Yet the opinion polls unanimously and unwaveringly indicate that the electorate is going to hurl the present government out of office. No doubt there are many reasons, but what is undeniable is that people are feeling neither good about the economy nor grateful for its performance. Why should this be so?

Contrary to all expectations, a low-inflation economy turns out to be an uncomfortable experience. Throughout the great inflation of the Sixties, Seventies and early Eighties, stable prices were held out as a golden prospect where all the tensions associated with the rising prices, strikes and the like would be calmed. Savings would be encouraged and investment would flourish as the uncertainty caused by inflation vanished. Indeed industrial stoppages have virtually disappeared and savers are doing exceptionally well. But in the event the means required both to reach low inflation and prevent its recurrence are brutal and the disciplines it imposes are unpleasant.

We find that governments cannot easily raise their budget deficits above trend, because international investors decline to hold the debt of the country concerned and the exchange rate declines. As a result, either the axe is taken to public spending or services are privatised or contracted out. At the same time, an era of low inflation removes from business the old escape route of raising prices when costs get out of control. Instead business finds itself subject to sporadic price cutting, as newspapers and book publishers have discovered. Increased prices will not stick. Something has to give, and it is employment.

The fear of losing your job remains acute even though fewer people are claiming unemployment benefit. This insecurity pervades the ranks of management quite as much as it affects the factory floor or the warehouse or the vast open-plan offices full of men and women working at desk-top computers. Any industrial company, any high-street bank, any local authority, any government department, any charity, any educational establishment, any research laboratory, any branch of the armed services can suddenly announce a re-structuring that extinguishes hundreds of jobs. Job security has vanished, along with notions of life-time employment or working for 40 years at the same company and collecting a full pension. As well as this general fear, there is an extra concern for many people - will their sons and daughters find jobs? Before employers make long-serving staff redundant in some down-sizing process, they first stop recruiting. The statistics for youth employment remain grim.

Whether the growing disparity between a few, highly paid executives and the rest is getting to people and affecting their political attitudes, it is impossible to say. What do the ordinary staff of National Westminster Bank, faced as they are with a series of job-cutting programmes, think about the activities of the dealers of NatWest Markets where the chief executive, Martin Owen, who has presided over a pounds 90m dealing loss, has agreed to forgo pounds 200,000 of a pounds 500,000 bonus as "an act of leadership". Apart from Mr Owen, a further handful of senior executives at NatWest Markets will together lose a staggering pounds 8m of bonus payments.

If declining unemployment figures have masked a loss of job security, rising house prices have also changed their meaning. This is because the unexpected collapse in house prices during the early Nineties was traumatic. The nightmare of finding that your house was worth less than your mortgage, the so-called negative equity trap, will remain in the memory of house owners for a long time. The episode has permanently reduced their confidence in property. When houses values improve nowadays this is seen as limited good news. What can rise can also fall - except that for generations, home owners believed that they were exempt from this iron law of the market place.

In effect the arrival of low inflation means that uncertainty has been transferred from savers to people at work. When Eddie George, Governor of the Bank of England, announced a few days ago that retail price inflation would fall below the Government's target of 2.5 per cent this year, it was superb news for savers and pensioners, and for the country over the long term, but it was of no particular comfort to the business community or their employees right now. And as Mr Major may well discover on 1 May, this change has the further consequence that the old, reliable relationship between the performance of the economy as a whole and voting intentions has come to an end.