Improving UK economy does little to lift Tory hopes of victory in July election
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Rishi Sunak declared at 7am on Wednesday that inflation had returned “to normal”, ending the pain of spiralling prices. Less than 12 hours later, the prime minister used this occasion to launch a surprise general election.
Most elections are decided on the economy. Sunak, surveying the economic horizon, concluded that this “major moment” was about as good as it was going to get for the foreseeable future.
Sunak and chancellor Jeremy Hunt concluded, according to senior party officials, that they should go to the country in July, off the back of an improving economy and with April inflation at just 2.3 per cent.
Grant Fitzner, chief economist at the Office for National Statistics, declared this month that the economy was “going gangbusters” after recording 0.6 per cent first-quarter growth. Real wages have grown for 10 months in a row.
The outlook for the next few months was viewed as less favourable, according to people briefed on Sunak and Hunt’s thinking, tilting the balance in favour of a summer rather than autumn election.
Markets expect inflation to tick up in the next few months with expectations of an early Bank of England interest rate cut receding. More importantly, Hunt had given up hope of delivering pre-election tax cuts.
The chancellor indicated to colleagues that there would be no Autumn Statement, given that the public finances would not be strong enough to allow him to deliver his hoped-for further 2p cut in national insurance.
Waiting until the autumn left open the prospect of more internal party infighting, leadership speculation and defections by disgruntled Tory MPs, while the economic upside was limited.
But there is little evidence so far that the recent good news on the economy is translating into a political boost for Sunak or the Conservatives. Tory MPs often complain that “the voters are not listening”.
Polling suggests the Tories suffered a decisive blow to their reputation for economic competence — usually a key determinant of general elections — during Liz Truss’s disastrous 49-day premiership in 2022.
Sunak has failed to claw back much ground since then, even if he claimed that the fall in headline inflation in April was proof “the difficult decisions we have taken are paying off”.
YouGov polling on who voters “trust on the economy” shows that Tory support fell during Boris Johnson’s time as prime minister, before slumping further after the Truss government’s “mini” Budget in September 2022.
The furore saw trust in Labour overtake the Conservatives on the economy, a lead it has maintained throughout Sunak’s time as prime minister and in spite of steadily improving inflation levels.
“Stability is change,” has become Labour’s official economic mantra; the party’s leader Sir Keir Starmer frequently turns political debate back to the chaotic days of the Truss premiership.
A key part of the problem, as Hunt acknowledged on Wednesday, is that better economic data is not significantly feeding through into household budgets. “It is tough,” he said, admitting that some voters felt “bruised and battered” by economic shocks.
The pitch being made by Hunt and Sunak is that voters will soon feel better off and should “stick with the plan”, and that switching now to Labour would be a dangerous leap in the dark
“Brighter days are ahead, but only if we stick to the plan to improve economic security and opportunity for everyone,” Sunak said earlier on Wednesday.
The problem for Sunak is that time is running out. Given that the economy only moved out of a mild recession at the start of 2024, the public appears not to be in any mood to give credit to the prime minister.
Anthony Wells, senior political pollster at YouGov, said Tory poll ratings on the economy may be nudging up slightly but they were only “slightly less terrible” than they were before.
Wells drew parallels with the devastating economic shock of Black Wednesday in 1992, when Britain was forced to leave the European exchange rate mechanism, which delivered a hammer blow to the economic reputation of John Major’s government.
He added that by the time of the 1997 election, the Conservatives had clawed back some of that damage and were “roughly neck and neck” with Tony Blair’s Labour party on the economy.
But even getting back to parity had taken almost five years — not the 18 months since the Truss debacle — and Major’s government went into the 1997 election boasting 4 per cent growth and low inflation, not the anaemic growth seen recently in the UK.
Lord Norman Lamont, Tory chancellor at the time of Black Wednesday, said that while the Truss Budget had not caused much lasting economic harm, it had caused reputational damage.
Lamont said a lot of Britain’s economic problems were hardly the fault of Sunak’s government, but that “sometimes people are very unreasonable in their expectations”.
Rachel Reeves, shadow chancellor, argued that the Tories would not gain any credit for falling inflation.
“I can understand why a Conservative prime minister who is richer than the king might want to run to the television studios to tell Brits that they’ve never had it so good,” Reeves wrote in the Sun newspaper.
But she said voters just needed to “look at their bank balances and the price of the weekly shop to know they are worse off”.
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