Labour draws level with Government on economic competence but Ukip is gaining ground, study shows

Labour has drawn level with the Government on economic competence but Ed Miliband may not reap the benefit from it at the next general election, according to a new study.

Instead, the UK Independence Party is gaining ground on the economy as well as issues on which it has won support such as immigration and Europe, said the University of Essex, which has been tracking public opinion since the Coalition was formed in 2010.

It concludes that the Coalition's reputation for economic competence is a "wasting asset". In 2010, about half the 1,000 voters polled each month by YouGov for the study believed the Government was handling the economic crisis well. Only about a quarter believed the Labour Opposition would do so. Today the Government and Opposition are neck and neck, but only about one in four people have confidence in either of them.

"Labour is not benefiting at all from discontent with the Government's economic strategy when it comes to modelling of voting behaviour," said Professor Paul Whiteley, director of the National Policy Monitor at Essex. "However, Ukip is benefiting, which means that defection from the Conservatives to Ukip is in part driven by economic discontent. Ukip has been making hay with the immigration issue, but it looks like it is gaining ground on the economy as well."

The study has a crumb of comfort for the Liberal Democrats. It suggests that although the lack of progress on the economy has damaged Nick Clegg's party, it is unlikely to fall further in the polls because it has already dropped to its baseline vote. In contrast, the Tories could decline further.

The findings will worry both the Tories and Labour. Tory MPs are hoping that tomorrow's Budget will revive their party's fortunes but their hopes of dramatic tax cuts to kickstart the economy are likely to be dashed.

Conservative backbenchers are increasingly worried about the threat from Ukip after it pushed their party into third place in last month's Eastleigh by-election. One senior Tory said: "Everyone has got the jitters. The threat is not that Ukip is going to win lots of seats at the general election. But it could split the right wing vote and deprive us of victory in Labour-Tory marginals. That could spell disaster for us."

Labour will welcome its improved ratings on the economy. But modernisers who want the party to spell out more policies and examples of where it would cut spending will seize on the Essex findings as evidence that it still has a long way to go to win the voters' trust.