How the Fiver Theory explains this election campaign
This was Romney’s pithy summary: “It’s a proven political strategy, which is give a bunch of money to a group and, guess what, they’ll vote for you.” It’s a very good expression of one half of what I call the Fiver Theory of politics. And Fiver Theory is a pretty helpful thing to understand as the British election campaign gets under way.
Fiver Theory begins with a statement of something that is so simple it is almost embarrassing to state. People like fivers. If you give someone five pounds they are pleased. This banal observation turns out to have profound political implications. As Romney discovered.
In their compelling book The Hidden Agenda of the Political Mind, the political scientists Jason Weeden and Robert Kurzban show how self-interest shapes our political views even when we won’t admit it to ourselves or anybody else. They argue that even cultural issues such as attitudes to political correctness or foreign wars have their roots in economic advantage for a person or group of people. There is a vigorous academic argument about their conclusions but I found their case, and the data they used to support it, pretty convincing.
So a good way of analysing the political potency of a policy or a speech is to ask: where is the fiver? What is the concrete advantage of the proposal and to whom? Even if the policy does not involve money, who gains from it? Yet this is only half of Fiver Theory. The other half is this equally banal statement: people don’t like to have a fiver taken from them.
In fact - and this is crucial - people dislike losing a fiver more than they like being given one. In 1979 the social psychologists Amos Tversky and Daniel Kahneman published a groundbreaking paper which showed how hard people will work to avoid loss, and how sensitive we are to the risk of loss in a gamble compared with the prospect of a gain.
Indeed, subsequent work by them and others suggests that, expressed crudely, the psychological impact of a loss is about twice that of a gain. So that in order to make people risk a fiver, you have to offer them a tenner.
The challenge posed to politicians by Fiver Theory immediately becomes clear. People like to receive a fiver, but they dislike losing a fiver so much that you have to give someone a tenner to make the gainer as happy as the loser of the fiver is cross. Yet you can’t magically turn five pounds into ten pounds. This is Fiver Theory.
It is possible to quibble a bit about the numbers here. Not everyone starts with the same material endowment, so the impact of gaining and losing set amounts will be different for different people. It is certainly possible to imagine an individual who wouldn’t miss a fiver as much as another person would value it. But across the electorate I am confident it holds.
And politicians respond to it in one of four ways. The first is to promise to magically turn five pounds into ten pounds. This is essentially Sir Keir Starmer’s offer in this campaign. Elect a Labour government and they will make the economy grow much faster. It is not at all obvious how. But this promise allows them to pledge that there will be no new taxes while implying (they are, it must be said, admirably prudent about directly promising) increased spending over time.
The second is to promise five pounds to some voters and find ways of getting this money back that the losers might not easily notice. The Tories putting up corporation tax is an example of such a policy, as is Labour’s promise to increase non-wage labour costs. So is planning to cut spending (as the government has) without spelling out what that might mean. Eventually, of course, the costs become clear, but it takes time and you can end up being elected or re-elected during the gap between imposition and realisation.
The third approach is to borrow the fiver that you are giving out. This too involves an eventual cost, but it takes so long for the full amount to become apparent that the losers might no longer know who to blame. This makes borrowing very attractive. Austerity - the necessary policy of reducing borrowing to limit these costs - is now, depressingly, almost universally derided. This is not surprising because it involved taking fivers away from people that had been given to someone else years ago.
And then there is the fourth approach: just promise to give away fivers and hope no one asks who is going to provide the fivers. Remarkably, people often don’t ask. Both parties have tied themselves to the triple lock on pensions, with Rishi Sunak now adding a promise to raise tax allowances for pensioners as well.
This policy will be popular. With pensioners. Pensioners are being promised fivers, and people like fivers. And because both parties are pledging similar financial support there will be little questioning over where those fivers are going to come from. Surely it is time there was?
The Tories are talking about tax cuts over time. The shadow chancellor Rachel Reeves has ruled out increases to income tax and national insurance, adding that “there are no additional tax rises needed”. Yet neither of these seems remotely realistic unless accompanied by a programme to limit public spending.
As the Institute for Fiscal Studies and the Office for Budget Responsibility have both shown, we are approaching a crunch. Our debt interest payments are close to an all-time high; the age and social profile of the population is putting more pressure on the welfare budget and the National Health Service. Despite this, the official budget plans, which both parties accept, have built in cuts.
Over the next 50 years, with unchanged public obligations, the amount we will need to spend on the NHS will go from 8 per cent to 15 per cent as a share of GDP. Over the medium term our public spending commitments are unsustainable at present levels of taxation.
If the manifestos are to be of any value at all, they should address these compelling facts. But that involves telling voters about the fivers they have to give rather than the ones they can gain. So I bet no one does. Fiver Theory won’t let them.
The Times
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