Election fever (2)

So..... what do we know?

Before the Tory conference it seemed certain that Gordon would call an election and that he would win it. The Tories just weren't ready and there were doubts about Cameron's leadership. After the Tory conference there has been a Cameron bounce and the Tory Party has seemed remarkably united.

Let me say now that if Cameron has pulled this off, giving his party more time to get its act together, he will have scored a remarkable political coup. And a lot of the credit must go to George Osborne, who is the election co-ordinator and also shadow chancellor: it seems from polls that what has really swayed the voters has been the proffered reduction in inheritance tax. He may look and talk like an irritating 12 year old but there seems to be some sense in him.

But I've said before, in my view Brown would be mad not to go to the country now, if only for the reason that things are going to get a lot worse. The British middle classes can put up with a lot but not the value of their houses going down. This is one of the things that did for Major and it is enough to finish Gordon Brown. And Brown knows what it happening: who better?

Total UK household debt was 164 per cent of GDP at the end of 2006. In the USA, widely regarded by international commentators as up to its ears in debt, it was only 140 per cent. If the present financial crisis brings something in the way of a slowdown - not even a serious recession - we are in for trouble. Don't forget the people who have been borrowing 100% of the value of their houses on 4 times or more their salary. They will be in negative equity, and those who lose their jobs will be bankrupt. They will vote accordingly.

At the first sign of recession the Bank of England will reverse its upward leaning on interest rates (almost everyone thought they would rise one more time to 6pct. Now nobody thinks that) and drop them gradually. But if the housing market has already suffered the jitters reduced interest rates will not immediately work through into house prices - fewer people will be buying or selling. The pound will fall and there might - in 9-18months - be an export led recovery. And this is not fancy: lenders are already tightening credit conditions and laying off staff. Many people in the City are forecasting a 20% drop in house prices.

A pick-up in 9-18 months. Now Gordon has to call an election by Spring 2010, and usually the press start jeering after four years of a government - Spring 2009. The timing looks bad for Gordon.

All this assumes that the Tories can keep united and learn that when confronted with an open goal you have to kick the ball in (too many cock-ups have passed without comment from camp Cameron over the last year). But Gordon will see that Cameron has learned how to keep the traditional conservatives in order - offer a tax cut. The press will be against him over this and over the EU Constitution and his chances could be slim.

He ought to go now while there is still a chance.