There is a formula to winning general elections. If your leader outperforms his or her principal rival and your party leads on the economy, you are going to win. There is no example, since records began, of a party which led on those two measures and then went on to lose the election. But let’s not forget that politics is, as Ronald Reagan once said, simple, even if it is hard to do.
Sir Keir Starmer is holding up his end on the first element. In the latest YouGov tracker, 39 per cent of those asked thought Starmer was doing a good job and 43 per cent thought he was performing badly. A deficit of four points is hardly spectacular but you only have to beat the opponent in front of you and Rishi Sunak has a performance deficit of 17 (34 per cent say “good” and 51 per cent say “bad”).
The question then arises of whether Starmer’s party can command the trust of the electorate on the economy. This is a historic point of vulnerability for Labour. The litany of economic calamities that have occurred while the party has been in office — 1947, 1967, 1978, 2008 — haunts Labour. This will be the Tory party election campaign — after a difficult time, they will say, the cost of living is coming down and Labour will ruin the recovery.
The inheritance, should Labour win, will not be pretty. Public debt is high and pressures on the welfare budget will continue to be strong. Angela Rayner in particular is fond of making expensive promises funded by corporation tax or capital gains tax but these are not levies which raise a fortune and neither can be increased without consequences.
This is the context in which shadow chancellor Rachel Reeves dumped a long-standing Labour pledge to spend £28 billion on green investments. Within Labour circles there is a lot of irritation to be heard about some of Ed Miliband’s environmental pledges. Labour’s “fast track” plan to achieve net zero carbon emissions by 2030 included money for offshore wind farms and electric batteries, efficiency upgrades for every UK home and promises to end fuel poverty for 2.5 million households.
Mr Miliband and his able deputy Jim McMahon are always keen, following the example of President Biden, to stress that this is a measure for job creation but Reeves has taken exception to the initial borrowing requirement that it implies.
In a recent speech in Washington, Reeves argued that Labour’s sovereign economic value would have to be security. It was a speech designed to reassure that Labour would not be profligate with the public finances.
Reeves is fortunate that Liz Truss and Kwasi Kwarteng gave her the perfect opportunity. The market reaction to the brief tenure of Britain’s least successful prime minister and chancellor makes it plausible to say, as Ms Reeves does, that they “crashed the economy”.
Yet there is a bigger problem that lurks behind this sensible change of policy. Britain’s economic troubles are significant. Interest rates are already at 4.5 per cent and any further rises might start to do some serious damage in the housing market. The inflationary pressure that comes from the Ukraine war and the effect on energy prices will not subside quickly. The cost of living is Labour’s ready attack line while in opposition but problems which propel a party into government becomes problems that have to be dealt with once they win.
And that raises the wider concern about the Labour Party. The Washington speech contained much that still needs to be fleshed out on industrial policy. Once more modelled on President Biden’s administration, this seems to suggest subsidies for domestic industries, not something on which Labour has an enviable record.
Thirteen years after the banking crash it is still not obvious what it means to be a Labour government without a lot of money to spend. The Blair and the Brown years were a time of plenty. More than a decade later we are still no nearer to knowing what it means to be a social democrat when times are hard.
