The ruling assumption of politics has changed. Keir Starmer has grown in confidence as people expect him to become prime minister. He is tempted to believe that the Conservatives have damaged their reputation for economic competence as fundamentally as they did when John Major’s exchange rate policy collapsed in 1992.
But I understand that privately, as well as publicly, his message is “no complacency”, and that he says he cannot be sure Rishi Sunak is down and out. Starmer is well aware that Labour starts from a much lower base than it did in 1992, when Major had a small majority (which had disappeared by the time of the 1997 election).
He is aware, too, that although the voters care about public services, Labour cannot win the election from its “comfort zone” of the NHS, and that he and Rachel Reeves, the shadow chancellor, will have to fight to retain their current advantage on the central issue of the economy.
Hence the importance of three things that didn’t happen after the autumn statement on Thursday. To start with, nothing happened in the markets. The pound abroad is worth what it was before Jeremy Hunt got up to speak. Market expectations of future interest rates are unchanged. That was the only test Hunt had to pass, and he passed it. It involved some skilful expectations management, and some frankly devious accounting, but it worked.
Hunt put up taxes, observing the maxim of Jean-Baptiste Colbert, Louis XIV’s chief minister, about plucking the largest number of feathers with the minimum of hissing from the fiscal goose. He avoided putting up the rates of income tax by allowing wage inflation to push more people into higher rates, and reducing the threshold for the top rate to £125,000 a year, thus keeping to the letter of the 2019 Conservative manifesto, which promised not to raise “rates” of tax.
That was enough to satisfy the markets that the public finances had been restored to sustainability, while public spending cuts were postponed until after the election. Thus the vulnerable have been protected, “those with more” have been asked “to contribute more”, and “Austerity 3.0” (three because there was an original period of austerity after the war) is now the next government’s problem.
Will that government be led by Sunak or Starmer? To begin to answer that question, we should observe two other things that didn’t happen after Hunt commended his statement to the House. First, the general public appeared unmoved. Several opinion polls carried out since Thursday morning show Labour increasing its lead a little, which is hardly surprising considering the wall of doom that was the media coverage of the statement, mostly about the Office for Budget Responsibility’s forecast of a two-year fall in living standards. But the polling on the measures themselves suggests grudging acceptance rather than opposition, while the increased yield from top-rate taxpayers is supported by a margin of four to one.
Starmer takes some comfort from the “pause” in the closing of the gap between Labour and the Conservatives in the polls. He warned the shadow cabinet that Sunak might get a “double bounce” when he took over: one from not being Liz Truss, and another from setting out his own programme. That second bounce hasn’t happened, but what might be more significant is that a tax-raising Budget hasn’t gone down as badly with the voters as it might have done.
The other thing that didn’t happen is that the voters don’t appear to blame Sunak for “the current economic turmoil in the UK”. A survey by People Polling for Matt Goodwin and GB News on Friday found that 21 per cent blame Truss’s Conservative government; 21 per cent blame global events such as the war in Ukraine; 14 per cent blame the legacy of the coronavirus; and 9 per cent blame the energy companies. Only 6 per cent blame “Rishi Sunak’s Conservative government”. That must be the most encouraging opinion-poll finding for the Tories since Boris Johnson’s vaccine immunity faded last year.
It is likely that Sunak will be blamed increasingly for the nation’s economic privations over the next two years, but he starts with a surprisingly clean sheet. Starmer had hoped that Johnson’s trick of pretending that his was a new government would not work for Sunak, and he will be hoping that “14 wasted Tory years” might have some purchase on voters’ minds by the time of the election in 2024. The Labour leader keeps going on about “five prime ministers in six years”, but what if that turnover is actually a good thing for the Tories?
Sunak will be unlike Major going into the 1997 election, in that Major was responsible for the European exchange rate mechanism debacle, whereas Sunak warned against the Truss experiment. It is often forgotten, too, just how unpopular Major was. Apart from the devaluation of the pound, which was a national humiliation but led to a long economic boom, the reasons for his unpopularity are also widely forgotten. It may be that Sunak, too, will appear to be the weak leader of a party divided over Europe and beset by personal scandals, but Starmer cannot bank on it.
Nor can Starmer and Reeves be sure that, when it comes to a choice between alternative governments – rather than opinion polls giving a thumbs up or down to the current one – the voters will prefer their centrist programme to that of Sunak and Hunt.
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One little-noticed announcement in the autumn statement was the government’s adoption of a second fiscal rule, limiting itself – at a future date – to borrowing no more than 3 per cent of national income. That was the old Maastricht rule, a condition of adopting the euro, and it is currently suspended for members of the eurozone. But if Labour accepts the rule – and Starmer said yesterday that he accepted the “baseline” set by the autumn statement – that would mean Labour’s great big £28bn-a-year green investment plan has gone out of the window. The old rule of borrowing only to invest has been superseded.
Maybe, as in 1997, the Tory government has so discredited itself that there is nothing Sunak can do to halt the forward, Blair-like march of Starmer. But Tony Blair never took winning for granted – and neither, rightly, does Starmer.