Friday, 18 April 2014

The Conservatives' overall chances: putting together the pieces

It is important to understand that Labour's chances of making gains and the Conservatives' chances of defending their seats, while related, are not identical. We can infer Labour's chances of securing an overall majority or most seats with some confidence from the list of its targets. But we cannot simply look at the list of seats that the Conservatives are defending and do the same thing. It is obvious that a party that holds seats already does not just aspire to gain seats, they must also defend what they have.
In the case of Labour, that's a largely theoretical distinction, because only a handful of seats that they hold are more likely to be lost than seats that they covet are likely to be won. But for the Conservatives, the position is a lot more complicated. The complicating factor is the likely decline of the Lib Dems. The Conservatives are currently expected not just to lose seats to Labour, but also to gain seats from the Lib Dems.

Many who have looked at this market have looked only at the seats that the Conservatives might lose without considering the seats that the Conservatives might gain. This is a serious mistake. To set this right, here are the Conservative battleground seats, arranged by odds:

The big point to note here is that quite a few of the seats currently held by the Conservatives are rated as less probable Tory wins than seats that they are targeting. 37 Lib Dem or Labour seats come in this category, meaning that if the Conservatives achieve what we might call a uniform odds swing such that they retain all their existing seats up to and including Thurrock, they would have a comfortable overall majority. The magical 326th seat would be Yeovil, which they would win at odds of 10/3. This is more or less the same as the odds on Betfair on a Conservative overall majority, which can be backed at 4.2 (16/5). So there is no great advantage to backing the Conservatives in individual constituencies as opposed to backing the Conservatives on Betfair.
Similar observations can be made about the Conservative most seats market. It's unclear how many seats would in practice be required. The 305th seat would be Brighton Kemptown at 9/4. The 300th seat would be Bedford at 2/1. The 290th seat would be Elmet & Rothwell at 7/4. There's a bit of an advantage over the Betfair most seats prices (currently around 5/4), but it's not overwhelming.  That Betfair price equates to the 283rd seat by swing - which given the current seat division between Labour and the Conservatives would have been just enough to give them most seats.  Of course, 283 would not be enough this coming time on the implicit assumptions in this table, because the Lib Dems would have far fewer seats.
So by all means prefer to bet on the Conservatives in the constituency markets rather than the general "most seats" markets for better value, but don't kid yourself you're getting amazing value.  It's just a little better.  By the time you get to the levels required for an overall majority, there's not much additional value to be had at all.
Where is the crossover between Labour and the Conservatives?  For that we need to compare the Conservative battleground with Labour's targets:
If Labour take Halesowen & Rowley Regis (and every seat before that on their target list) and the Conservatives take Elmet & Rothwell (and every seat before that on their defence list), both will have exactly 290 seats.  So there's the pivot point, if the bookies' odds are right.

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