What really caused the Tory drubbing in 1997?

There's been a lot of re-writing of history about the 1997 general election, mainly by people who were small children at the time, or who were born afterwards.

They look at the GDP stats and note that the economy was growing rapidly in the years leading up to 1997. They look at the public sector finances and note with surprise that the national debt was low as a percentage of GDP and falling. They look at the crime stats and see how it was falling. Then they look at the newspaper headlines at the time and note the myriad MP sleaze scandals and the incessant Tory fighting about Europe.

And they conclude that the 1997 election was uniquely NOT about the economy, but was about culture. That people were tired of scandals, quarrels and fuddy-duddy Tories, and instead wanted a change to clean, fresh, modern New Labour.

But silently in the background was a massive economic issue: the 1990's House Price Crash.

In the last quarter of 1989, the average house price was £61,495. By 1993, this had dropped to £50,128. That was an 18% drop. Anyone who had taken out a 100% mortgage, which was popular in the 1980's, was suffering negative equity (where your loan was bigger than the value of your home).

The average disguised a lot of regional variation. In Kensington and Chelsea, prices barely dropped. In the Midlands and the north, prices fell by 45%.

In 1995, the average house price was £50,930. In Q1 1997, just before the general election, the average house price was £55,810. source.

In other words, in 1997, house prices were still below their 1990 levels.

People will put up with negative equity for a couple of years - but not for seven years. Angry, fed-up Tory voters abstained in 1997.

The incoming Labour government removed supervision of the banks from the Bank of England and gave it to the newly created Financial Services Authority (FSA). The FSA promptly loosened banking regulation, and the housing market roared back to life. So much so that it lead to the Great Financial Crash of 2008 - but that's a story for another day.

But the bottom line is that the 1997 general election was absolutely about people's personal finances and wallet issues.