Yesterday, 3 November, the Bank of England raised interest rates by 0.75 percentage points – the highest single rise in 33 years – to tackle spiralling inflation. Unemployment is expected to double, and mortgage costs to rise.
Andrew Bailey, the governor of the Bank of England, warned that the UK is facing its longest recession since records began, and that British households can expect a “tough road ahead” – terrible news for those of us who felt the road was pretty tough already.
If Rishi Sunak had hoped to solidify his premiership with an early election, he’s likely to think again. Economic woes are difficult for any party in power, but if recent weeks have shown us anything it is that they can be catastrophic for a country’s leader.
Sunak may have reason to feel that he can weather the storm. Historically, the Tories have been seen as reliable custodians of the economy and, despite the cost-of-living crisis and the disastrous mini-Budget under Liz Truss, that doesn’t seem to have changed. A recent YouGov poll showed that 50 per cent of Brits trust Sunak with the economy, while only 40 per cent trust Keir Starmer.
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Sunak may be able to defend his fiscal actions by evoking the failure of Trussonomics – something he continuously warned about in his Conservative leadership campaign this summer. He is also likely to point to how the Russia-Ukraine war is causing global market instability.
But Labour can smell the weaknesses. Growth and productivity have remained sluggish throughout the Conservatives’ 12 years in power. And Sunak was chancellor when the government lost billions due to incompetent decision-making during the pandemic – thanks to a combination of Covid business fraud and purchases of unusable PPE. Given that Sunak had such a high-profile tenure in No 11 Downing Street under Boris Johnson, it is unlikely he can escape the blame for the state of the economy.
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Liz Truss’s election also demonstrated the firm grip that the right wing of the party has over government policy. A majority of the public favours tax rises over spending cuts to balance the books, but this is unlikely to fly with some Tory backbenchers. Sunak is stuck in the middle – the electorate and some within his party are at odds with how they want him to proceed. One Labour source mused to me about an old Ken Clarke quote, where the former Conservative chancellor compared the right of the Tory party to crocodiles: “You can feed them buns as long as you have some, but once you run out they will eat you anyway.” How long will Sunak keep them sweet, and what will become of him when he no longer can?
Labour are keen to demonstrate that they are a government in waiting. On Thursday 3 November, the shadow chancellor, Rachel Reeves, gave a speech to the Anthropy conference in Cornwall, where she pressed home Labour’s green plan for economic growth. In contrast, it is still not clear how the government intends to get us out of this mess.
On 17 November we can expect the Chancellor, Jeremy Hunt, to set out his economic plan to parliament once again. Then the real test will come at election time, when it will be revealed whether the Tories can maintain their reputation for economic competence if, after well over a decade of Conservative rule, people are materially worse off. That’s if the crocodiles don’t get hungry before then, of course.
This piece first appeared in the Morning Call newsletter; subscribe here.
[See also: The uncertain future of the Tory party]