Something rather interesting is happening in economics and politics, and I don’t mean all the other crazy things happening, such as a round-robin letter from central bankers, including our own Andrew Bailey, in support of one of their number, Jerome Powell at the US Federal Reserve, who is under attack from Donald Trump. The crazy bit of this was not the letter, but the attack.
Or I could delve into the latest monthly figures for gross domestic product (GDP), up 0.3 per cent in November and on course for a small rise in the final quarter of last year, instead of the flat outcome feared by the Bank of England. But the GDP figures were distorted by the rebound from the Jaguar Land Rover cyberattack, and it is too soon to say that they signalled a sustained upturn.
So, putting those to one side for the moment, the interesting thing I wanted to write about is that, according to the pollsters YouGov, the Conservatives have opened a nine-point lead this month over Labour on who voters most trust to run the economy. It is the biggest such lead since January 2022, when Boris Johnson was prime minister, but before the Russian invasion of Ukraine.
• UK economy grew 0.3% in November
I was prompted to look at the data by the defection of Nadhim Zahawi, the former Tory chancellor, to Reform UK, but before the dismissal and defection of Robert Jenrick. And it made me wonder if these were unusual examples of politicians deserting a ship that, far from sinking, is righting itself.
I know Zahawi of old, so he won’t mind the story of a pub quiz I took part in a few months ago, when the question was to name the last six chancellors. This was akin to my Mastermind specialist subject, so I knew, but nobody else could remember his name.
He is one of those rare former chancellors, only three since 1900, whose tenure came and went within a single year — two months in his case, from early July to early September 2022. The others were Kwasi Kwarteng, that same year, and Iain Macleod, who sadly died in office in 1970 after just six weeks in post. I suppose there are circumstances in which Zahawi could have another go as a Reform UK chancellor, though that would tread on a lot of toes in his new party.
Anyway, back to that Tory lead on economic competence. Kemi Badenoch, the party leader, has sharpened her act on the economy, it having been a weakness for her. As George Trefgarne of PR firm Boscobel & Partners, a fan, wrote a few days ago, she was an “unimpressive” business secretary — as she was. As he also wrote, “she doesn’t always listen and can be abrasive”. Indeed. But there is improvement.
Trefgarne, who warns that he may be getting carried away in his enthusiasm, thinks she could be prime minister as soon as 2028.
Alongside Badenoch, Sir Mel Stride is an old-fashioned shadow chancellor — in a good, Geoffrey Howe-ish way. He works hard and he and his team send me a lot of WhatsApp messages. He looks like he could be a safe pair of hands, something that I fear Rachel Reeves will never achieve.
We are a very long way away from the next general election, but voters’ perception of economic competence is important. If we look back to 2024, and the election that year, it tells us rather a lot.
The Tory lead over Labour on competence, massive at the start of the pandemic when my fellow columnist Rishi Sunak was chancellor — in March 2020, the Tories were on 47 per cent, Labour 14 per cent — had dwindled to nothing by the end of Boris Johnson’s premiership.
In October 2002, the height of chaos and uncertainty during Liz Truss’s thankfully brief premiership, Labour moved into a decisive lead, 32 to 15 per cent, and held onto it — though eventually by only single-figure percentage points as Sunak and Jeremy Hunt, prime minister and chancellor, respectively, guided the government into the July 2024 election.
The Labour lead on the economy was small by then, a mere seven points in June 2024: 29 to 22 per cent over the Tories. That told us voters were sceptical about Labour’s ability to improve the economy or even manage it competently. You could call it the wisdom of crowds.
Labour’s low economic competence rating was directly linked to the fact that it won a landslide with an astonishingly small share of the vote, 34 per cent. Enthusiasm there was not, for either of the main parties, who between them mustered only just over 57 per cent of the vote in a low-turnout election. Only just over 20 per cent of eligible voters voted Labour.
• General election 2024 results map and charts
I should say that while the Tories are now doing better under Badenoch than a few months ago, their opinion poll lead over Labour on economic competence almost entirely reflects a slump in the government’s reputation.
Reeves has presided over two chaotic budget build-ups and two badly received budgets, her first in October 2024 more unpopular than her second in November last year. She has made many enemies with her tax decisions including farmers, owners of family businesses, parents with children in private schools and pub landlords. She has made few friends.
Meanwhile, inflation remains above target, though with the prospect of a fall this year.
The chancellor has claimed credit for interest rate reductions by the Bank of England, though they have not yet helped the party out of the hole it is in. She has been responsible for more than her fair share of the government’s 13 U-turns.
Labour does not just find itself well behind the Tories on economic competence but, gallingly, also behind Reform UK, currently on 14 per cent, when economics is that party’s self-admitted weak spot. Spare a thought too for the Liberal Democrats, who rank lower on this score than the Green Party, with its fantasy economics.
• David Smith: Don’t fall for political parties selling economic snake oil
All the main parties have work to do. When voters are asked who they most trust to run the economy, “none of the above” and “don’t know”, in combination, is the clear winner, with 40 per cent support.
That is not surprising; the economy is in a rut, with slow growth in living standards. Real wages have barely increased in the near-two decades since the financial crisis. Total pay adjusted for inflation is a cumulative 3 per cent up on where it was in early 2008, 18 years ago, which is pathetic. People want hope, something to be optimistic about, and so do businesses.
Labour has a lot of work to do on this, having dashed a lot of hopes since it was elected 18 months ago. It will hope November’s GDP figures were the shape of things to come. The Tories have hauled themselves up from the canvas, but they too will have to work very hard to persuade voters that they can do better than when they were last in charge.
Things can change. In time, we will look back on this period of economic disappointment from the vantage point of greater prosperity. The party able to steer a country that is now hard to govern back to those better times will reap the dividends. This is the battle that lies ahead.
PS
The people have spoken. I mentioned last week that my annual forecasting league table has been suspended for a couple of years for a variety of reasons, among which laziness on my part was not something I touched on. I asked whether I should bring it back.
The response taught me two things. One is that many readers do get to the very end of this column, which is where I mentioned it, and which is very gratifying.
The second is that there is a big appetite for the return of the league table. Everybody who responded wanted it back. The November GDP figures give us the numbers for most of last year, so there is no excuse for delaying too long.
My source, as before, will be the Treasury’s monthly compilation of independent forecasts for last January. Traditionally, I have looked at five variables: GDP growth, inflation, Bank rate, unemployment and the current account of the balance of payments. But this time I will add in public sector borrowing — the budget deficit.
There were 27 separate forecasters in last January’s Treasury compilation. The consensus then was a fraction low on growth, quite a bit too low on inflation and public borrowing, and bang on for unemployment.
To avoid complaints, anybody not in the Treasury compilation who can send me a bona fide forecast made in January last year, with evidence, could be added to the league table. But the evidence will need to be good.