Next Labour Leader Betting: Why the market favours the wrong Miliband

UK Politics / Paul Krishnamurty / 22 August 2010 / 3 Comments

David Miliband (right) is ahead of brother Ed in the betting - but should you trust the odds?

"Having been decisively rejected at the general election, the Labour Party is in a reflective mood. All the controversial decisions of their era in government are being revisited, and a debate is underway about its future direction."

Paul Krishnamurty says the next Labour leader odds are all wrong - here's why...

The first rule of betting on party leadership contests is to recognise that the specific electorate involved bears little resemblance to the wider populace. Most people aren't, and would never consider becoming, party activists. Remember, it took three election defeats for Conservative activists even to opt for a telegenic, fluent media performer. In the two previous contests, internal divisions over the general direction of the party led them to reject Ken Clarke and Michael Portillo, despite their greater name recognition and in Clarke's case, popularity amongst the wider public. In both cases, odds-on backers paid the price for failing to recognise the mood of the party's electorate.

Similar forces are in play in this contest, although it is less obvious which candidate would fare best with the country. Having been decisively rejected at the general election, the Labour Party is in a reflective mood. All the controversial decisions of their era in government are being revisited, and a debate is underway about its future direction. A substantial section of the party was never signed up to the 'New' Labour agenda, yet failed to articulate an alternative and lacked leadership. This contest may turn on whether any of the candidates are able to fill that void, and offer a coherent 'change' agenda. 'More of the same' may not be the way to inspire a dejected audience.

This contest will be decided by an electoral college, comprised of three sections. Firstly, there's the various parliamentary representatives. Secondly, individual party members. Thirdly, there are the individual members of trade unions and other affiliated organisations. Though there are five candidates, from what we know already about nominations, this looks a two-horse race between brothers David and Ed Miliband.

David is currently [1.44] favourite, thanks to a narrow lead over his brother amongst the MPs and party nominations. Ed, however, has secured the recommendation of the three largest unions. Voters get to list their candidates in order of preference, placing great emphasis on ideological alliances. As neither are likely to win over 50% of first preferences, the result will depend on how supporters of the other three candidates use their secondary preferences.

We have already seen how pivotal these vote transfers can be, in the 2007 contest for Deputy Labour Leader. Then, Harriet Harman pipped Alan Johnson by 50.44% to 49.56%, causing carnage on Betfair in the process with Johnson matched down to [1.1]. The reason for the dramatic swing was that Johnson led all the way through the counting process until the third placed candidate's extra preferences were transferred. Harman's alliance with union favourite Jon Cruddas led to his campaigners specifically recommending her as his second preference.

Underlying that choice was a split in the party, that has implications for the Milibands. Just as David is now, Alan Johnson was seen as the main 'Blairite' or 'continuity' candidate. Alternatively, Harman and Cruddas were seen as the candidates of the Left, urging a different direction. Due largely to the trade union section, the latter held the balance of power within the party. As the Guardian's analysis shows, every trade union nomination secured the most votes amongst its members. Unison, GMB and Unite - the main players in terms of size and campaigning potential - have all recommended Ed Miliband.

When those unions came out for Ed, the market reacted by forcing him into [2.8]. Since then, he's drifted back out to [3.5], for little good reason. It is probably a reaction to the sole opinion poll we've had on this subject, with Yougov predicting a 54-46 win for David. However, there are a number of problems with that poll.

During that contest for Labour deputy, the earliest poll showed Hilary Benn in a commanding lead. With hindsight, that was probably a reaction to greater name recognition, with respondents picking the surname ahead of lesser-known opponents. Once the campaign was underway, he slipped back to a distant fourth. This time, David is the best-known candidate, and therefore arguably the one with most to lose.

Nor did that poll have a convincing methodology for counting second preferences, which are by no means certain to split equally. Supporters of Diane Abbott should overwhelmingly back the more left-wing Ed, with David probably holding the edge amongst Andy Burnham's backers. Ed Balls is less certain and potentially kingmaker. He and Ed Miliband were allies in the Brownite tendency within New Labour, and both have strongly courted the Left. To take the example of one popular leftist voice within the party, Ken Livingstone is calling for people to give their first two preferences to the two Eds. Ken's advice in 2007 was Cruddas/Harman.

Most critically, the poll was taken long before unions starting sending out their recommendations to members. Until they do by early September, I would treat any poll with great caution. The Yougov prediction that David was winning the trade union section is unbelievable. If indeed, that assessment were to be altered in favour of Ed Miliband, the race would be neck and neck. On that basis alone, the outsider of two must represent decent value, and I suspect Ed's strong position will gradually become apparent throughout September.

Recommended Bet:
Back Ed Miliband to be Next Labour Leader @ [3.5]

Comments (3)

1. Phil W | 23 August 2010

   I agree with this reasoning. Some other factors that favour Ed M are that:

   1. Labour List have been doing a series of readers surveys that, while not scientific opinion polls, are nonetheless useful as tracking polls, showing apparent trends in support. Ed M was behind David M early on, but is now leading him. This is significant given that the You Gov poll is now 4 weeks out of date.

   2. The "Left Foot Forward" site have their own methodology which, whatever its merits, is showing a differential of only 36% to 30% favouring DM over EM on 1st preferences only. If there is any truth in the arguments about 2nd/3rd preferences of DA/EB/AB favouring EM then this effectively puts EM and DM neck and neck.

   3. The argument about DM having the name recognition advantage at the early stage is backed by the evidence from US primaries, which often favour incumbent senators at the early stages, only to see a narrowing as the challengers become more well known. (For example, the Democratic Party Specter/Sestak primary in Pennsylvania recently.) DM was clearly better known at the start of the contest so can be regarded as the incumbent here. This could be quite important in the trade union part of the college.

   Overall, evens for EM would seem more realistic odds!

2. Rob Sheffield | 25 August 2010

   Those labour list surveys are what UKPR calls 'voodoo polls'. Indeed 20% of those voting in the most recent were not even Labour party members. You could have had Tories voting for Ed as he is the candidate they most want to win ;-)

   David M has won the primaries held for ordinary members and has the majority of MP's. He is in the box seat still.

   The interesting element is Andy B- his manifesto was brilliant and showed clearly that he is the neo-Blairite candidate in this election.

   Where Andy's second prefeences go will seal the fate of either Miliband IMHO.

3. Paul Krishnamurty | 27 August 2010

   Thanks for the comments

   Lots of interesting developments since I wrote this. Mostly very good news for Ed Miliband. The New Statesman's editorial backed him yesterday, the unions have started sending out their advice, and he's won some extra support from Scottish and Welsh MPs.

   On the other hand, the influential MP Jon Cruddas has surprisingly backed DavidM. There's quite a debate going on within the centre-left think-tank Compass, with whom Cruddas is closely connected. Their other main MPs - Jon Trickett, Chukka Umunna - are both EdM supporters. Compass says it will recommend whoever wins their members' ballot, which I believe is out next week.