General Election 2015 – the bookmaker’s perspective

This week I attended the talk given by Peter Kellner, President of YouGov.  It was fascinating to hear one of the leading lights of the political polling community explain his thoughts and opinions on the coming election, where issues such as the rise of the SNP and UKIP has made this a uniquely difficult election to call. Previously, I had taken the approach of using council election results to gauge the strength of opinion in each constituency. This time I have taken the opinion of those who have “skin in the game” by having a financial interest in the winner of each seat; the bookmakers. I was also interested to see how tactical voting might have a role to play in determining the winner of the election, and whether the current fragmented state of the political landscape is likely to help or hinder Ed Miliband’s attempts to unseat David Cameron as Prime Minister.

I compiled a dataset containing the best odds available on each candidate for each seat in the Election. I was able to use this data to evaluate the implied probability for each candidate for each constituency. Of course, the sum of the probabilities for each candidate for each seat do not sum to 100%. This is because, for every event that a bookmaker will take bets on, there will be an overround, which is how the bookmaker makes his or her profit. For example, if there was a horse race with two horses, both priced at 4/5, then each horse would have an implied probability of winning of 5559%. The book is (5559% x 2) 11119%, and the overround is 1119%, so if the bookmaker took two bets totalling £111.11, split evenly on each horse (the punters each have a halfpenny), then the profit to the bookmaker is guaranteed to be £11.11. The higher the overround, the better the deal for the bookie, and the worse the deal for the punter.

Interestingly, of all the seats one can wager on, all of the worst 10 in terms of overround are in Northern Ireland. The least generous in the country is the market in East Belfast, with an overround of 29%. So not only is Northern Ireland the worst place in the UK to seek emergency medical care, but it’s the worst place to have a flutter on politics too. Typical.

I have taken any seat that has a candidate with odds of 1/20 or lower to be a safe seat. It is striking that, even given the unprecedented uncertainly surrounding May’s election, most of the seats are considered safe, uncompetitive races. The electoral map, if you only look at safe seats, looks like this.

Safe Seat Map (1)

In terms of safe seats, only one seat separates Labour and the Conservatives, who have 162 and 161 respectively. The SNP have six, the DUP five, Sinn Féin have 4. The SDLP, Plaid Cymru, Independent Sylvia Hermon, and the Speaker John Bercow all have one apiece. Neither UKIP nor the Liberal Democrats have any seats that are considered foregone conclusions by the betting markets. A spreadsheet containing all of the safe seats, as well as all the other data used to create this analysis, can be found in a Google Spreadsheet here.

So with Conservatives and Labour essentially tied in terms of safe seats, both David Cameron and Ed Miliband are almost exactly halfway to either retaining or capturing the Premiership. Both need a further 161 seats to claim the 322 needed for a parliamentary majority, assuming Sinn Féin do not take their seats. If every seat in the country goes the way the bookies think they will, what would the final tally be in terms of seats? I took the implied probabilities from the bookmakers’ odds, and adjusted for the overround in each seat to get probabilities for each candidate.

All Seats

Labour are the betting favourites in 289 of the constituencies, whilst the Conservatives are favoured in 273. The Liberal Democrats are expected to win 30, with the SNP fourth on 25. After that the DUP are favourites in nine constituencies, with UKIP and Sinn Féin following them with five seats each. Plaid Cymru and the SDLP are expected to win three seats each. Naturally the Speaker is expected to hold his seat, and Sylvia Hermon is safe in North Down. Despite the surge in their polling numbers in recent weeks, the Greens are not expected to advance beyond the single seat that they hold in the current parliament. Three Scottish seats, Cambridge, and Birmingham Yardley are all considered too close to call, with two parties tied on exactly the same odds.

Given the gains the Conservatives have been making recently, this would probably be a good outcome for Labour. They would be able to govern with the support of the Liberal Democrats and any one of Plaid Cymru, the SDLP or the DUP. The Conservatives would have no real route to putting together a coalition, as they would still be five short even if they obtained the support of UKIP, the Liberal Democrats and the DUP.

Looking at betting odds gives an insight into how tactical voting and vote splitting could play a part in determining the winner. I placed all the parties with a greater than 5% chance of winning in one of three camps. The first group consists of parties who are left-leaning in outlook and would prefer to see Ed Miliband as Prime Minister; these parties are (of course) Labour themselves, the SNP, Plaid Cymru, the SDLP, the Alliance Party, the Greens and National Health Action. The second group consists of those who would prefer to see David Cameron as PM, which consist of UKIP and the UUP in addition to the Conservatives. The third group consists of the two parties that could go either way, the Liberal Democrats and the DUP.

I have assumed that, from a tactical voting perspective, voters would prefer to see one of the parties from their “team” elected as a first preference, but if there is no viable candidate from their group, then they would rather see a party from the “could go either way” group elected to keep out a party from the opposing team. For example, a Green supporter would obviously like to see a Green MP elected, but Labour would be their second preference, and if there was no viable Labour or Green candidate, they would prefer to see a Liberal Democrat elected if the alternative was for the Tories or UKIP to take the seat. I appreciate that most Northern Ireland voters don’t vote this way, but it seems a reasonable approach to take in Great Britain.

Of the 310 seats where the outcome is any sort of doubt, 98 are Tory-Labour marginals, with Labour favoured in 55 of these. There are 36 seats that are considered a straight fight between the Tories and the Lib Dems, of which the Conservatives are favoured in 22. There are 115 seats that are less likely to play a part in determining who can form a government, as they are between parties that would be likely to club together if there were coalition negotiations. Examples would include scraps between the Conservatives and UKIP, where there is no viable left-leaning candidate, or a straight battle between the SNP and Labour, who might be expected to club together if it was necessary to form a coalition or working arrangement.

There are eight seats where the only viable candidates are either Labour or UKIP. This includes Ed Miliband’s seat of Doncaster North, which the bookies reckon has an 8% chance of falling to UKIP. There are four wide open seats, where all three camps have a viable candidate. This leaves 49 marginal seats where a split vote, on the right or the left, could let in a candidate from the other team. When you look at the different categories of marginal, with the betting favourite in each one, the problem posed by UKIP to the Conservatives becomes apparent.

Marginal Forecast

There are only five seats where a split on the left could lead to the Tories or UKIP winning, and a further four where a split between Labour and the Lib Dems could lead to UKIP winning. However, there are 40 constituencies where a split on the right could lead to Labour winning the seat, and Labour are favoured in 16 of these. It now becomes apparent why David Cameron is so desperate to include left leaning parties in the debates; the split voting effect is harming his chances of victory a lot more than it is harming Ed Miliband’s prospects. A rise in Green support would help David Cameron enormously by splitting the left vote in much the way that UKIP are splitting the right.

Peter Kellner made an excellent point. Had the Alternative Vote electoral system been introduced, then the split vote problem would evaporate, and the Tories may well have been able to win an outright majority. The Conservatives’ decision to vociferously campaign for a “No” vote in the AV referendum may well prove to be one of the most short-sighted and foolish decisions in modern British political history.

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  • mjh

    Absolutely fascinating, Salmon.

    While an outcome like this would permit the formation of a “Lab + LD + one other” government there would appear to be only one combination capable of commanding a majority solid enough to survive a full five year term. That would be Lab + Lib Dem + SNP, which would have a majority of around 45.

    It is unlikely that the participants in a Government with a majority of below 10 would expect it to survive much more than 18 months.

    In these circumstances the winner of the biggest number of seats may find that their prize is a poisoned chalice.

  • David Crookes

    Many thanks for all the work that you’ve put into that fascinating posting, Salmon.

  • Martyn

    The whole article is very interesting but the last paragraph is absolutely fascinating. It seems right to most people that the AV electoral system is the better one as soon as you have more than two main parties. If the Conservatives had done what was right for the electorate they would have benefitted themselves.

    If we end up with another coalition in the UK, then AV has to be considered seriously again

  • john cc stevens

    Very interesting thank you

  • Turgon

    Very difficult to reopen the system of voting when it was rejected by a thumping majority at the referendum on the subject. Such an attempt would smack of European Union style contempt for voters: “the people voted the wrong way make them vote again until they get it right.”

    The level of contempt that would show for the process of referenda and indeed the expressed wishes of the electorate would be likely do more damage to the legitimacy of the democratic system than any benefit to legitimacy changing the voting system would gain.

  • tmitch57

    “I appreciate that most Northern Ireland voters don’t vote this way, but
    it seems a reasonable approach to take in Great Britain.”

    No, in Northern Ireland voters vote on the basis of sectarian ideologies rather than economic ideologies, but they still have their “camps.”

  • Ian James Parsley

    Great piece – and a good deal nearer than extrapolating Council Election results, amusingly!

    The best polls are the ones which ask not which way someone will vote, but rather who they think will win. The reason for this is that the respondent has to consider not just their own bias, but also that of their social circle, which may just move them towards the winner. Interestingly, the only poll that I saw ask this in Scotland did so several months out (when Yes was on about 39% in the polls) and came up with Yes 47% – which wasn’t too far out!

    For that reason, though it is not as good as that type of poll, betting markets are often closer than opinion polls. The thing to watch now is the trend – if we begin to see that Labour figure reducing and the Conservative figure increasing, fairly soon, then David Cameron is likely on his way back to Number 10; if not, or if movement is very slow, then Ed Miliband is likely to take over.

    Just one other minor correction: an outright majority without SF is 323 seats, not 322.

  • Ian James Parsley

    My instinct at this stage is that Lab+LD is the likeliest government, with SNP backing on supply. I don’t see Nationalists (or Unionists) actually in government.

    That said, I would have expected even in the betting Labour to be nearer 300 at this stage. So my other instinct is that this time next year David Cameron will be in Number 10. But, as Ken Clarke rightly warned on Friday, don’t trust anyone predicting this with any certainty!

  • salmonofdata

    Thanks for the kind feedback, folks.

    On the number needed to get an outright majority, you’re right that a majority is 323. Although, with 322, that would mean that the number of Government MPs would equal the number of opposition MPs (650 – 5 (SF) – 1 (Speaker)) / 2 = 322. Since, in the event of a tie, the Speaker will vote against a motion of no confidence, you could argue that you could have a working majority with 322 ( ). Although, since the Speaker would also veto every single Government bill, it would be a uniquely ineffectual Government…

  • mjh

    I don’t see a government reliant on nationalist support on a confidence and supply basis going the full distance. Sooner or later the pressure from unpopular decisions, or the temptation to seize some perceived advantage, would lead to the collapse of that support.

    If the leader of the largest party cannot stitch together a formal coalition with a sound majority he will probably be just as well to announce that he will form an administration on a confidence and supply basis in order to provide the country with short-term stability, but that he will be seeking a proper majority in a new election in the autumn.

    I doubt that the SNP would want to enter a formal coalition. But we may be in territory where there are no modern precedents.

  • AnotherDave

    UKIP won the 2014 EU Parliamentary Elections. That didn’t stop the Conservatives from passing power over Justice and Home Affairs to the EU.

  • John Gorman

    Which bookies are you getting your odds from especially the Northern Ireland seats?

  • salmonofdata

    An odds aggregator website, so it should be the best price available from a range of bookmakers. Not sure who is specifically offering prices in Northern Ireland.

  • John Gorman

    Cheers. I initially couldnt find anything on any of the bookies sites. They all have odds for the constituencies in GB but not here for some strange reason but I then found this site which has everything included.

  • 55tan

    UKIP won the EU elections so it should be UKIP talking to the EU not what is left of the Tories

  • 55tan

    ‘At this stage’ anything is possible.

  • Kevin Breslin

    If UKIP want to talk to the EU, they can do so in the European Parliament they enjoy sitting in so much. In Britain they need to play constituency politics or accept a shredded vote.

  • Kevin Breslin

    I agree but I think the supply argument will become Nationalist (SNP, SDLP, PC) vs. Unionist ( Scottish & Welsh Labour, Scottish&Welsh Lib Dems, DUP etc.) . Might even see Nationalist vs. Unionist vs. England.

  • salmonofdata

    Thanks. Although I disagree that a Lab + LD coalition would be unstable even if it had a single digit majority, or even a small minority. This is because for such a government to fall, it would require a right-leaning CON, UKIP, and unionist bloc to convince one or more of the left-leaning small parties (PC, Greens, Sylvia Hermon, etc.) to join with them on a confidence vote, and that seems unlikely.

    A right-leaning coalition with such a small majority, though, would be a logistical nightmare for the Government. Another thing Peter Kellner pointed out was that the current coalition suppresses the leverage that the very Eurosceptic Tory right has, because the LD votes mean they are not needed to pass Government bills. Add a handful of UKIP MPs into the mix, and it would essentially be impossible for the Tories form a coalition with the Liberal Democrats, who would probably be needed again to form a Conservative-led coalition as things stand. If the betting markets are understating UKIP seats then the problem gets even worse. A Conservative-led coalition probably needs a majority of around 30 or so before it would be considered stable, leaving the Conservatives with a mountain to climb.

    It’s very possible Ed Miliband could lose in terms of votes and MPs, but still win due to the quirks of an antiquated electoral system. Of course, he does have notable form in this area, as some in his family may well remember.

  • tmitch57

    Governments with slim majorities are not necessarily unstable, provided that they consist of a small number of like-minded parties with a common goal. Fianna Fail until the late 1980s used to rely on minority governments propped up by the votes of independent candidates. Government coalitions become unstable when small parties use their function to blackmail and aren’t really interested in national goals but only in the interests of its voters as for example the ultra-Orthodox parties in Israel.

  • mjh

    I wasn’t thinking about the internal discipline of a coalition with a single figure majority. (Although it is a very important point. Just think of all the problems John Major had after the 1992 election with the dozen or so serial rebels from within his own party. This stress would be likely to be multiplied within a coalition.)

    Even more to the point is the problem of mid-term by-elections. Governments regularly lose these. This steady whittling away of a small majority tends to provoke more mutiny on the backbenches. And the majority itself could have disappeared within a couple of years.

  • mjh

    However a majority of half a dozen (or even fewer) in the 166 member Dail or the 120 member Knesset is comfortable.

    In Westminster, with 650 members, there are liable to be four or five times as many by-elections – and proportionately more potential rebels in the governing party ranks. So a majority in single figures does not provide the same stability.