While we’re yet to hear the parties’ promises for the next parliament, Sky’s economics and data editor says there’s plenty to digest over the past four years and into the present.
„It’s economics nonsense”. So, famously, went Bill Clinton’s campaign team in 1992.
For all the noise and frenzy and politics during an election campaign, most people end up voting with their wallets.
In fact, in every election campaign in recent history, the winning candidate is the most optimistic about the economy.
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Prime Ministers and US presidents struggle to win re-election when the economy is bad – they tend to win when everything is going well, when GDP is expanding, when inflation is low, and when interest rates are low. Fall rather than rise.
In some sense, it helps explain why the Prime Minister called the election at this point.
This morning, the annual rate of inflation fell to 2.3% – the lowest since 2021. The economy is currently in recession, with stronger-than-expected growth of 0.6%. The Bank of England is poised to cut interest rates.
UK economy 'turned a corner’
The problem, of course, is that in many respects the economic story is not particularly rosy. The annual inflation rate may be more or less below „normal” levels, but look back a little further and it’s still much higher than it was a few years ago.
Living standards, as measured by real household disposable income, have fallen faster in this Parliament than in the previous one. In that respect, it is the only parliament since 1955 to experience such a decline. If anyone wants to ask themselves: Do you feel better than you did five years ago? Well, the answer is not particularly encouraging to Rishi Sunak.
’Not out of the woods yet’
But how little that actually owes to the Prime Minister (or her predecessor Liz Truss) is a more complicated issue than some would have you believe.
Much of Europe faced a somewhat similar experience as the pandemic that accompanied Russia’s occupation of Ukraine and the subsequent energy price shock wreaked havoc on their economies. Although there are some aspects of recent policy – notably Brexit – Britain is not exactly unique, which could further depress UK trade.
Meanwhile, public finances present a similarly complex nuanced picture. On the one hand, the national debt and tax burden are significantly higher today than they were at the last 2019 general election (in fact the tax burden is at its highest level since the 1940s). Again, the cost of the furlough program and the energy price guarantee are a large part of the explanation, and are not particularly controversial policies.
The Conservatives will argue at the polls that they are starting to clear up the mess and they can be trusted more than Labour. Whether that strategy succeeds remains to be seen.
But we’ll start to learn a little more about each party’s economic plans in the coming weeks — and we’ll bring you all the analysis as those plans become clearer.