Britain, Cameron See a Glimmer of Economic Hope

British Prime Minister David Cameron trails in the polls, has fallen behind on his deficit reduction program, and been undermined by rebellious lawmakers. Even so, his Conservative Party can find cause for optimism. The economy shows signs of returning to growth, and the opposition Labour Party is embroiled in a dispute about its ties with its union backers. Yields on 10-year gilts—British sovereign bonds—are trading at less than 1 percentage point above record lows, allowing Cameron to argue that investors support his strategy.

The austerity imposed by Cameron and Chancellor of the Exchequer George Osborne is unpopular, “but people don’t see any alternative, either to the policy or to the government,” says Anthony Wells of polling company YouGov. The Conservatives are about 8 percentage points behind Labour, the average spread when all opinion polls are considered. “After slashing spending, raising taxes, freezing wages, I’d expect things to be a lot worse for them,” says Wells.