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Lots of sense, but little appetite for it

Public Affairs_
11 July 2023
Public Affairs

The government is talking but few are listening, a heavy defeat now seems inevitable.

The Chancellor’s Mansion House Speech yesterday passed by with relatively little fanfare. His speech to the great and good of the financial services world in the City of London set out several ambitious measures designed to make use of the UK’s financial services sector to drive economic growth.

Chief amongst these were plans to encourage pensions to invest in riskier, high growth assets that will bring about greater returns in the long run.

Between them, the Chancellor and the Governor of the Bank of England, Andrew Bailey, also used their platform to encourage businesses away from looking to restore profit margins that were squeezed during the COVID-19 pandemic. Drawing the link between such behaviour and continuing high levels of inflation, Jeremy Hunt suggested that recovering old margins would ‘benefit no one if it feeds higher inflation’.

Such messaging reflects the Prime Minister’s recent tone whereby high interest rates were justified in terms of being necessary to help contain inflation. In short, the medicine now may be painful, but it will be worth it in the long run.

In a similar fashion, the reception to the speech broadly reflects the reception that the Prime Minister and his government have received as they approach their first anniversary in office. While there is understanding that the measures and approach are sensible and will bring benefits, there’s doubt that they will make much difference in the short term and rejection at the ballot box appears inevitable. For example, the Chancellor’s key announcements on pensions could generate an additional £50 billion of investment in ‘high growth companies’ by 2030.[1] The government pays the price for yesterday’s poor decisions while leaving a sensible legacy for the governments of tomorrow.

Asking the public and businesses to hold back on wage increases and price rises would likely play better if the Prime Minister and his Chancellor could point to a future pay off. As it is, the glum national mood is feeding increasing apathy towards the government. YouGov’s latest polling had the Conservative Party on a tepid 22%[2].

Media reports over the weekend suggested that the Prime Minister himself is beginning to share in the glumness. Progress on each of his five pledges (1. Halve inflation, 2. Grow the economy, 3. Reduce national debt, 4. Falling NHS waiting lists, 5. Stop illegal migration) has been slow at best.

If the party of good economic governance and property ownership is incapable of telling a good story on either, what good story can it tell?

The behaviour of Conservative Party backbenchers indicate that many are already looking to the future. The traditionalist ‘National Conservatives’ have already begun to make their pitch for future control of the Party with a policy agenda that very much spoke to a leadership contest in opposition, rather than a programme for today’s government.

Perhaps the one hope left is that Labour is yet to carve out genuine enthusiasm for the Party in government, the reality is that Keir Starmer and his team may not even have to. This government is now well and truly associated with the current state of the nation, it’s one that many of us would rather forget.