There was a bit of a space-crunch in Saturday’s paper, so were were unable to run a piece looking at the impact of the credit crunch on public confidence in the economy. The basis for it was a remarkable Ipsos poll showing that economic optimism had fallen to its lowest level since the early 80s, when Britain was experiencing its most severe post-war recession.

It is hard to imagine that voters really are that pessimistic. After all, 28 years ago inflation was approaching 20 per cent and interest rates were well-clear of 15 per cent. Anyone with doubts should take a look at these charts, which were kindly put together by Jerry Latter at Mori. They really do underline the scale of the political challenge faced by Gordon Brown.

But there is an odd trend illustrated by the graph that may work in Mr Brown’s favour. For the past six years, we appear to have gone through the “gloomy boom”. Even though house prices were rocketing, money was cheap and unemployment was low, people were more pessimistic than the last years of the Major government. Indeed at times they were more pessimistic than during the 1991 recession. How is that possible?

The peculiar gloom during the noughties does somewhat undermine my next question: is economic confidence a leading indicator for confidence in the government? The chart below is inconclusive. While economic optimism came before faith in government during the Thatcher era, the track record is much more mixed during the Major and Brown years. However the sharp fall in recent months will undoubtedly be worrying Mr Brown’s pollsters.

April 7th, 2008 in UK economy, Uncategorised | Permalink