Voting seems to me to largely a matter of feeling rather than thinking. I came across numerous people before the UK general election who supported a continued Coalition or a Conservative government on the basis that "there's no doubt that we are [as a country] a lot better off now" Most of them felt that this statement was, in effect, its own evidence.
Those few who felt any need for actual evidence would talk about "The National Debt", and how Labour governments borrowed recklessly whilst the Coalition had been more prudent and circumspect. Pointing out to these people that the coalition had actually increased the national debt more in their term of office than the previous three administrations combined was met with general disbelief, whether I quoted official statistics or those well known left-biased media the Financial Times and the Spectator.
I made it clear when discussing with these people that I didn't think the level of national debt, either in absolute terms or as %GDP, was the sole (or even a particularly important) indicator of the health of an economy, and that other arguments could be made in support of an argument that the Coalition had been more economically prudent. Very few people took me up on that, most preferred to stick to their guns by simply disbelieving my "claim" that the national debt had increased.
And this is the essential problem, not just with voters, but the people they vote in. Tribal allegiances appear to be more important than actually thinking about things, examining evidence and coming to conclusions. I would actually have preferred a totally hung parliament, so that things had to be achieved by people actually discussing things rather than the shameful school-playground-level tit-for-tat shouting show that seems to pass for sensible debate in the UK Parliament.
In this context, of course, it is easy to see why both parties prefer to conflate the two points that Tim has distinguished in this article. Labour won't come right out and say that they prefer a big state; that it would be better for the country and here are the reasons. Hell, they didn't even seem comfortable proposing anything other than a slightly milder austerity. (I bet most voters felt, bloody hell, if we have to have austerity, we might as well have the guys we can rely upon to give it to us!) The Conservatives, similarly, prefer not to say they advocate a small state, but to present it as the only reasonable choice for a functioning economy and pretty much to imply that anyone who disagrees with them is irresponsible and/or stupid.
The voters, therefore, catch on to simplistic arguments (which they mostly do not even understand) that show them that the political party with which they disagree must be composed of stupid, if not downright evil, people, rather than people who hold different views with whom it might be possible to come to some mutual agreements on at least some subjects. So we swing constantly between two suboptimal compositions of parliament with apparently no way out of this cycle.