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John Hemming’s guest piece: Mosaic and general election betting

September 2nd, 2006

Lloyd George was a trailblazer in a number of ways. As Chancellor he introduced the old age pension, unemployment benefit and financial support for the sick. As Prime Minister he led the country through most of the First World War. After the war he introduced political funding systems much like those seen today – by selling honours. One of his key areas of trailblazing was to approach politics from the perspective of winning the general election, rather than building a coalition in parliament.

It is, therefore, Lloyd George (developing Gladstone’s strategy) that we have to thank for making betting on elections possible. Historically, limited constituencies were represented by their chosen representative and alliances were made in parliament. Gradually, through governments such as that of Lloyd George, the patterns of loyalty shifted through to a class-based political system that lasted substantially through to the 1970s and still persists today to some extent. That allowed class-based political parties to dominate. That basis for politics has been fading since the 1960s, however.

As the traditional division into working class and others has faded, the complexity of the political system has increased. The proportion of the electorate that might swing between parties has massively increased and the number of people who are strongly committed to any one particular political party have been reduced.

David Cameron in many ways is acting like Tony Blair in that he is taking on his own political party. That strikes me as an odd political strategy. It makes the assumption that your strongest supporters will not go anywhere else. The traditional class loyalties, however, are shifting. Liam Byrne, my geographical neighbour, wrote an interesting article for the Fabians which explained how people now categorised as Mosaic Social Class E shifted substantially from Labour to Lib Dem, giving the Lib Dems the seats of Manchester Withington and Cambridge.

Experian Business Strategies are a company that aims to explain “individuals, markets and economies” in the UK and around the world. They have categorised households in the UK into 11 groups, 62 types and 243 segments. For example rather than the traditional A, B, C1, C2, D and E we now have from A01 (Global Connections) to K61 (Upland Hill Farmers). What Liam Byrne and Labour have recognised is that with broadcasting information systems and mass media (although politicalbetting.com is more like narrowcasting), different Mosaic Groups will tend to move between parties and party brand identities in the same directions.

Traditional political polling, therefore, has a weaker merit in working out actually which seats are to be won and lost. The swing is less and less uniform so simply applying a national swing will not give you a reliable answer. If people want to be able to turn the General Election into money on the betting markets they need to know the trends for different Mosaic Classes and link that up to the individual constituencies.

The other difficulty in political betting as an investment strategy is that the electorate are considerably more volatile. Political loyalties take some effort to destroy. Tony Blair has done quite an effective job of undermining the support of Labour’s strongest supporters. David Cameron seems to be trying to work the same sort of magic on Conservative traditionalists.

Personally I have done reasonably well in the financial markets by relying on the fact that the markets sell uncertainty. It is as if half of my investments went bust and half of them multiplied by 10. This still gives a 400% return on an even spread. Applying the same strategy to the political betting markets does require better market intelligence. Outside the political parties that information is not available. The normal poll results do not reveal the levels of volatility in shifts of support. Furthermore the individual constituency campaigns are becoming more important.

In a world in which the allegiance to a political party is weaker then allegiances to individual representatives can be stronger. This gives rise to a stronger incumbency effect. Labour’s strategy (called the L Vote) in recent years has been to identify where their own supporters are, and address the campaign to them. This may result in lower turnouts, although having postal votes where individuals fill in a few hundred votes each has helped increase the Labour vote.

Happily the more recent changes to election law will reduce the amount of electoral fraud. However, the job for anyone wishing to make a return from betting on a general election is getting harder and harder.

John Hemming is the Liberal Democrat MP for Birmingham Yardley.






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