Sunak Wins Over the Markets. Voters Are Another Story

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Two short papers have become famous in UK political history for their frankness on public finance. Reginald Maudling, the outgoing Tory chancellor in 1964, told his successor and Labor friend, Jim Callaghan, “Sorry old chicken, leave it as it is.” In 2010, Liam Byrne, Labour’s Chief Treasury Secretary, offered his Liberal Democrat successor, David Laws, a cynical excuse: “I’m afraid there’s no money.”

Their jokes were hung around the necks of their opponents, but they both had the truth. Successive governments were constrained by the humiliation of their predecessors. Today’s opposition parties should remember them as a warning.

With the Office for Budget Responsibility predicting that UK living standards will fall by 7% over the next two years (the biggest drop on record), it points to a defeat in the election of the Conservative in two years of the possibility. The Office for National Statistics estimates that wage growth is slower than inflation and that the recession will last a year. Middle-income earners – most of whom are Tory voters – will bear the brunt of the tax hike announced in Thursday’s autumn announcement.

Prime Minister Rishi Sunak, banker Goldman Sachs Group Inc. in the past, he has won the respect of the markets for keeping the economy in check, but he is struggling with the voters. He polls poorly for “communication” and “understanding the lives of ordinary people”. Maybe she’ll wear less Prada and expensive office wear. The personal is forever political. Sunak’s personal wealth and his ex-husband’s non-resident status (which gave him tax exemption on his overseas income) are tempting targets for Labour.

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Sunak also lacked former Prime Minister Boris Johnson’s X-factor appeal with former Labor voters who enjoyed his cheek to the political class. These spinners may return to their old loyalties in the next election. The Conservative party is desperate. His favorite newspaper, The Daily Telegraph, asks what’s the point of electing the Tories if they’re going to raise taxes and reform the public sector. The Institute of Economic Affairs, the UK free market think tank, accuses the government of “managing deflation”.

If the Tories lose, Chancellor of the Exchequer Jeremy Hunt will not fall into the trap of writing a secret letter of recommendation to his successor, Shadow Chancellor Rachel Reeves, a former Bank of England economist. But the unspoken message will be the same: No money.

Labour’s latest 20-point lead in the polls has set the stage for the party’s run, although an election victory cannot be taken for granted, given the number of seats it must take. available to the Workers for the majority. If they win, however, Reeves and his leader Keir Starmer will have to deal with a troubling Tory legacy. Hunt’s $55 billion budget cuts delay public spending cuts until after a general election in late 2024.

Center-left parties that have historically supported the provision of public services will see the banks empty. How will Labor make a difference if it can’t fund development plans? The ambitious $28 billion Green Recovery Plan, unveiled in September, looks vulnerable in today’s economy. Will jobs continue to decline?

Long before the time of the general election campaign, the traps are already in place for the workers. Hunt could challenge Reeves to agree to his plan or determine how he would find the money to pay them back. As Reeves himself noted in his response to Hunt in the House of Commons, “the Tories want to party like it’s 2010.” That year, Chancellor George Osborne cut the budget and challenged Labor to say how it would balance the books. Osborne, not coincidentally, was invited back to Downing Street to give advice on how to snooker the opposition.

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But the last time Labor tabled another budget — before the 1992 general election — the party lost, despite the exhaustion of 13 years of Tory rule. The Conservatives and their press allies have warned the opposition of the looming “threat of double taxation” and Labor has had no response.

Reeves and Starmer took a different route. Labor has trailed the Tories on economic efficiency for the last 15 years. Recent market turmoil has given them a lead in the polls, but that may be temporary — the prime minister’s latest Tory package of unfunded tax cuts led to his ouster in his position.

Labour’s Tony Blair and his Shadow Chancellor Gordon Brown faced similar problems in the 1990s. The Tory government of the day was plagued by divisions, scandals and economic failure. recently. But voters still needed to be convinced that their money would be safe in the hands of the workers, even though many wanted to spend billions to rebuild dilapidated schools and hospitals.

Reeves chose to emulate Blair and Brown, promising that a Labor government would not borrow money to fund day-to-day spending. He even supported Tory cuts to the basic income tax rate before lowering it a few weeks ago.

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But there is a big difference between the work of the past and the present. In 1997, Blair and Brown were given a bailout by the Tories in the middle of the long post-Cold War crisis. The cost of living has decreased and the cost of manufactured goods has decreased due to globalization. Today, globalization is reversed, war is at Europe’s door and the rise in interest rates on government debt has left a black hole in the Treasury’s accounts. The tax burden has risen to levels not seen since World War II.

Maudling’s economy and Byrne’s post-recession problems are closer to Britain’s economy. A glimmer of hope turns to the OBR’s optimistic forecast for steady growth to 2025. But Labor can’t guarantee that yet. It is more likely that “there will be no money”. The road back to power for the opposition party will be paved with poverty.

More from Bloomberg Opinion:

• The silence of the UK housing budget: Therese Raphael

• UK could use World Cup win — for economy: Andrea Felsted

• England already has a bad wealth tax: Merryn Somerset Webb

This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.

Martin Ivens is the editor of the Times Literary Supplement. Previously, he was the Sunday Times London editor and chief political commentator.

More stories like this are available at bloomberg.com/opinion

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