Ronald Reagan once joked that the most terrifying words in the English language are: “I’m from the government and I’m here to help”. Yesterday Britain’s premier, faced with figures pointing to a deepening economic malaise, promised: “I am totally, 100%, on it and it’s going to be okay”. Reagan, like our PM a California-dweller, would have thought it positively sinister.
Still, this was Sunak’s best attempt at sounding reassuring, leaning into his much-touted economic credibility as he addressed another “PM Connect” event in a Kentish Ikea factory. Forearms exposed, the PM’s reassuring Rishi routine also had some serious economic rationale informing it. In a bid to thwart an inflation doom spiral, informed by riled-up consumers chasing runaway price rises — hence further fuelling inflation, Sunak projected stolidity. But while the behavioural implications of an overheated economy may have necessitated such a performance, the PM Connect was noticeably flat. You needn’t be such an arch “big government” critic as Reagan to feel sceptical.
Of course, Rishi Sunak’s Bleak Wednesday — begun by the ONS’ cost-of-living bulletin — was followed on Thursday by the Bank of England’s Monetary Policy Committee hiking interest rates to 5%. It was a bigger rise than some expected, but economists have gotten used to being wrong-footed by Britain’s sui generis stagflation.
It’s the thirteenth time in a row the BoE’s MPC has upped the bank rate — and inflation hasn’t followed forecasts since January when Sunak first announced his pledge to cut it by half. The routine is therefore familiar: Britain dodges its disinflation target and the Bank of England duly responds. Economists now expect the base rate to hit 6 per cent by the end of the year. It means if Sunak does eventually hit his arbitrary inflation target, Britain will have run up higher rates — and have created angrier mortgage-holders — in the process.
Expectedly, Britain’s economic woes were the topic of choice for Keir Starmer at prime minister’s questions this week. Pressed on the government’s culpability amid our very-British-malaise, Sunak retorted: “As ever, the honourable gentleman isn’t aware of the global macro-economic situation”.
But Sunak’s global blame game jars with his highly personalised pitch at Thursday’s PM Connect event. On the one hand, Sunak insists that Britain’s crisis is international and, on the other, that he is “100% on it” and can fix it. The messaging brings into focus the broader question of Sunak’s credibility on economic policy — something he has so relied upon to supplement an otherwise ill-defined political identity since October.
The PM clearly imagines he has a mandate to soothe Britain’s economic ills — a result of the post-mini-budget political context which gushed him into Downing Street. Consequently, economic indicators on inflation, debt and growth figure one through three in his “five pledges” for government. It begs some profound questions: how does Sunak square this near-totalising emphasis on his personal mandate to fix Britain, while simultaneously blaming global factors for our problems? How does this pitch coincide with the reality that it is the Bank of England, not No 10, which holds the policy levers most associated with inflation?
James Cleverly, the unlucky foreign secretary tasked with media round duties on Thursday, will not have helped his boss’ economic pitch during his car crash interview with the BBC. Challenged six times to say how the PM planned to cut price rises, Cleverly stumbled, tongue-tied. Having at first cited interest rates before being reminded of the BoE’s independence, the foreign secretary could at best muster: “We’re very conscious that increased government borrowing is one of those things that loops around and increases inflationary pressures”.
Cleverly’s confusion underlines that there is no obvious policy pathway — apart from a mere suspension of potentially voter-winning tax breaks — to ease Britain’s inflation problem. (It is also no secret that a lack of tax-cutting commitment will whip up the Trussites still dotted through the Conservative parliamentary party). In truth, the government’s best strategy on inflation is to either direct thoughts and prayers squarely at Andrew Bailey — or remove him. Squeezing inflation out of the system is of course, despite Sunak’s oath-swearing, the Bank of England’s responsibility.
Ultimately, that is the logical core of Sunak’s economic credibility problem. Halving inflation is pledge number one in his bullet-pointed vision for government: it means failure on it — again Bailey’s brief — essentially surrenders the next election to Labour. Sunak hence finds himself hostage to his promises. There will be no way to spin missing a red line target like halving inflation by the end of this year.
In truth, it is little surprise that, according to one Survation poll, 40 per cent of people hold the government responsible for reducing inflation compared to 39 per cent who look to the Bank of England. The PM has stood on podiums across the country, with his pledge to “halve inflation” writ in block capitals in the backdrop. It means that while Sunak sits tight, with no obvious policy levers to reach for, his economic credibility will be slowly eroded — sacrificed on the altar of a glib New Year electoral gambit.
So as Rishi Sunak subtly reviles Reagan and says he is here to help, voters will connect more and more their worsening household balance sheet with prime ministerial inaction. Even if the PM pivots against the Bank of England down the line, voters will have already found their man to blame.
In all, Sunak will pay a high political price for his inflation-focussed electioneering. And I expect we’ll see a lot less of the PM’s infamous five pledges as Britain’s economic malaise deepens.
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