Up to now I have been working on the basis that the various betting markets on politics reflect the balance of opinion among those who are willing to place money on the outcome, and thus represent the current conventional wisdom about what is most likely to happen. But that begs the question who are these people who are willing to place money on political bets. Are their instincts skewed in any ways?
I do not have inside information on those who actually place bets on the political markets, but we can make deductions from the prices as to what motivates them to bet. So let's look at one set of constituency markets.
A straight choice
To make it easy, I'm going to focus just on the Conservative-held seats that are Labour targets. I'm going to exclude all seats where any other party is priced at 5/1 or less (or shorter than Labour), to cut out triangular fights. That leaves 91 of Labour's first 125 targets. Here they are arranged in order of swing required for Labour to take them:
The first thing to notice is that the prices are driven by considerably more than swing. The first seat on the list, North Warwickshire, is rated by punters as a less likely Labour gain than the 23rd seat (Brentford & Isleworth). The 87th seat on the list, Portsmouth North, is rated a more likely Labour gain than the 50th seat, Vale of Glamorgan. There is clearly a correlation with swing, but it's far from perfect.
Swing vs odds
Let's look at these seats reorganised by odds (I've used the Conservative prices):
I've also changed the numbering so I you can easily see the movements between these two lists. On average, there is a difference of over six places for each seat between these two lists. Note, I have deliberately constructed a set of comparable seats with minimal third party interference (Dudley South, Crawley and Brigg & Goole being the only seats on the list where any other party is significantly affecting the two main parties' odds). Yet punters seem sure that uniform national swing is going to be varied from fairly markedly even within this most typical of sets of seats.
19 seats shift 10 or more places, as follows:
20 or more places
15 or more places
Morecambe & Lunesdale
Ealing Central & Acton
Bristol North West
10 or more places
Plymouth Sutton & Devonport
Brentford & Isleworth
Milton Keynes South
The bigger the shift, the more compelling a reason we should be looking for to justify that shift. In some cases, the reason will become apparent. In others, I can't see why there are such big movements.
Uniform national swing
Leaving aside the internal movements, let's think further about the implications of uniform national swing. In the last few YouGov polls, Labour have posted 33% (give or take a point either way) and the Conservatives have posted 32%. That is a swing across the UK of 4%. That would mean that Labour could reasonably expect to take every seat up to Stevenage, the 47th seat on the list. But Labour are in fact odds against or second favourite in every seat bar one after Keighley, the 39th seat on this list, where only a swing of 3.1% is required.
If that is true of national swing, it is still more true of the position discounting Scotland. Labour are racking up a swing against the Conservatives of 5% or more outside Scotland, suggesting still greater gains. Evidently this does not faze punters on the constituency markets.
And all this is minor compared with the "most seats" markets. On Betfair, Labour and Conservative are both just about evens to get most seats. This implies a swing to Labour in these constituencies of under 2%, even allowing for the SNP taking a big bite out of Labour's Scottish seats. If you take this view of affairs, you should instead be betting on the Conservatives at odds against on the constituency markets in seats like Hastings & Rye and Nuneaton.
Clearly punters are expecting the swing to Labour to subside a bit from present levels. You need to decide for yourself whether that is reasonable.
Geography is destiny, so they say, but punters don't seem convinced. These 91 seats are spread across nine regions: there are no Scottish seats. If we leave the one seat in the north east to one side as representing too small a sample (I will not be expecting a major Conservative renaissance in the north east on the basis of Stockton South), the regional pattern is quite muted. In London and the South East, the Conservatives are rated by punters at 3.6 and 3.7 places per seat worse than uniform national swing would suggest. In Wales, the Conservatives are rated by punters at 2.5 places per seat better than uniform national swing would suggest and in the East the Conservatives are rated by punters at 3 places per seat better than uniform national swing would suggest. But otherwise, the effects of geography aren't worth noting. I should record that the result in the South East is almost entirely attributable to one seat: Portsmouth North (and that we would see the Conservatives rated at 3.7 places per seat better in the West Midlands than uniform national swing would suggest if the unusual seat of Dudley South is excluded).
I think that punters are probably underestimating the effects of geography at the next election. In particular, as we shall see, there is quite a bit of evidence that Labour are outperforming in London and I'm not convinced that this is adequately reflected in the markets yet.
Unlike previous general elections, we have had a plethora of constituency opinion polls, particularly for this section of constituencies. Survation have polled in Stockton South and Crewe & Nantwich, while Lord Ashcroft has polled in no fewer than 50 of these seats. Both Lord Ashcroft and Survation stress that opinion polls are snapshots not predictions, but in the absence of more direct methods of getting information for predictions, opinion polls are inevitably going to be used to some extent to help punters make predictions.
Here are all the polls for constituencies on this list, in decreasing order of Labour lead:
I've also included a column in the table of seats organised by odds (in the link given further up) which includes the headline poll figure.
Only 11 of Lord Ashcroft's constituency polls show a lead for the Conservatives, and only one of the Survation polls. But punters don't really seem to be taking all that much notice of these constituency polls. Only 12 of the constituencies noted above that have moved ten or more places out of order from uniform national swing on the odds table have constituency polls. Labour are shown just on the seats polled to be presently ready to take 40 of the 51 seats polled. Either the punters don't believe the polls or they are expecting swingback to the Conservatives.
As can be seen from the table above, there are some anomalies. The Conservatives are rated less likely to take Hove than Carlisle, despite recording only a 3% deficit in Hove and an 11% deficit in Carlisle. The Survation poll in Crewe & Nantwich seems to have been essentially ignored.
Should punters be taking more notice of the constituency polls? It's hard to know how much weight to put on them, because in Britain we have limited experience of their use and this has been drastically increased in advance of this election. I have reservations about them, since they involve the compilation of non-standard polling bases for each constituency. The risk of mistakes is much greater and there is always the risk that a poll in a particular constituency is an outlier. A surprising result may just be a quirky sample - these things are to be expected from time to time.
But having disparaged them, I also recognise that they are the best information that we have in most seats. We ignore them at our peril.
How best to use them? It would be unwise to rely on single polls uncritically. Where we have more than one poll in a single constituency, as in Stockton South, we can be much more confident about the underlying picture. Unfortunately, that is the extent of the seats on this list with two polls.
As with any opinion poll, the headline figure of each poll should be treated as in the rough area of the actual lead. So a finding of a 5% lead might easily be 2% or 8% - 5% is merely the single most likely lead on the data available. Where the two parties are found to be dead level, it is equally likely that each was in reality in the lead in the constituency at the time the poll was taken. But a finding of a 10% lead is unlikely to mask a reality where both parties are neck and neck.
Again, we should always remember that a poll is a snapshot not a prediction. Things may change.
I am more confident when we can look at comparable constituencies together. So with that in mind, I have prepared a list of the seats by region:
In the north west, the Conservatives are apparently outperforming in both Morecambe & Lunesdale and Blackpool North & Cleveleys, given the size of their majorities in those seats. The fact that we have two Lancashire coastal constituencies telling the same story strengthens the credibility of both polls. We don't have a poll yet for South Ribble, but might that outperformance extend down the coast?
In the east midlands, punters seem not to believe that Lincoln or Amber Valley are quite close, despite Lord Ashcroft's polls suggesting that the Conservatives are only a bit adrift, apparently relying more on the small swing required to take them. If you do take the view that the Conservatives might revive a bit against Labour, both of these seats are worth considering for a bet on the Conservatives.
There are substantial swings to Labour in every London Conservative/Labour marginal so far polled except Harrow East. That makes that particular poll a little suspect in my eyes (particularly since the pattern of a strong Labour performance is also reflected in polls in Hampstead & Kilburn and various Lib Dem/Labour marginals). At present, neither Finchley & Golders Green nor Enfield Southgate are seen as disproportionately likely to fall to Labour. If the trend is replicated in those constituencies once polled, the odds on Labour are likely to be cut sharply. I'm already on Labour in Finchley & Golders Green from last year and I've now invested a small sum in Labour in Enfield Southgate too.
In the west midlands, the Conservatives seem to be bearing up fairly well in general. The Wolverhampton South West poll will disappoint them, and the poor odds on the blue team in Dudley South reflects an extraordinary poll from Lord Ashcroft in Dudley North which shows UKIP a whisker behind Labour. But the odds on the Conservatives holding Stourbridge, which is adjacent to Dudley South, have so far been completely unaffected by this deduction. This may be a seat worth a few quid on Labour too. But take your own view of the matter - Halesowen & Rowley Regis is adjacent to Stourbridge and the results of Lord Ashcroft's poll in that constituency were pretty good from a Conservative perspective, given the size of their majority.
There have been four polls in the eastern region and all four have been fairly poor for the Conservatives. However, this does not seem to have been noticed. Perhaps the betting public assume that East Anglia is predestined to be blue. None of the prices on the Conservatives look attractive and the evens on Labour in Stevenage still looks decent to me, given that Labour recorded a lead of 5% in a recent poll.
Even after taking all these points into consideration, some of the large movements look odd. Why are the Conservatives so poorly thought of in Portsmouth North? Why are Labour thought so likely to win Bristol North West from third? Why is Rugby seen as so safe for the Tories? None of the information available seems strong enough to justify large deviations from the norm. Betting against these anomalies seems sound.
Punters do seem to be taking a sunnier view of the Conservatives' chances on the betting markets than the current information would suggest if no further polling movements take place, apparently on the assumption that in the run-up to the election, the polls will swing back in the direction of the Tories. The movement being anticipated is not all that large on the constituency markets, so far as one can judge from the constituency polls so far conducted. The movement expected on the general "most seats" markets is larger, and must be correspondingly less likely.
Some of the seats seem to be irrationally regarded as safer for the Conservatives than the information available suggests, and some the reverse. There remain betting opportunities, even in the simpler problems posed by a straight fight between the two main parties.