Economy improves too late to save Tories
Labour is on the attack about ‘gaslighting’ – but voters’ minds may already be made up.
This week Labour turned the nation’s attention to “gaslighting”. The term has been used by everyone from Love Island contestants to domestic abuse charities to describe the actions of those who manipulate and confuse their partners to the point where they question their reality and basic sense of self.
Only this wasn’t about Keir Starmer’s decision to welcome the uber-right-wing Tory Natalie Elphicke as a defector to Labour – even if half his party remain puzzled as to how exactly their new colleague’s views tally with theirs. Instead, it was about economics. Rachel Reeves used her first public intervention since promising results in the local elections to accuse the Tories of “gaslighting” the public on the state of economy. Speaking in the City of London, the shadow Chancellor said that the Government was guilty of misleading the public by saying the economy was on the up – describing Jeremy Hunt’s plans to improve things as deluded.
For the Treasury, the criticism was unwelcome – but the timing of the speech was taken to be a tacit admission from Labour that the economy is beginning to improve in a way voters could soon notice. “Rachel giving that speech shows Labour know things are turning in the right direction,” said one Treasury figure. The question is whether it will be something the Tories get any credit for.
Among the positive indicators were GDP data showing the UK was no longer in recession – with the economy growing by 0.6 per cent in the first three months of 2024 – better than anticipated. Then there’s improved labour market stats, and figures due on 22 May which may show inflation is back to its target rate.
“Rachel is the one gaslighting the country on the state of the economy,” said one Tory.
In truth, the speech had been planned for some time because Reeves and her team have always been aware that May had the potential to be important for the Government’s economic message – therefore there was an incentive to shape the narrative before the Tories had a chance to.
The gaslighting phrase was – an aide said – a “team effort”, but one they will keep running having been delighted with the coverage so far. Focus-group feedback from voters is that most people do not feel much improvement in their finances – to the point that a Tory on the airwaves seemingly patting themselves on the back can come across as self-congratulatory and out of touch.
Combine this with plans to attack the Tories over their ambition to abolish national insurance (NI) and the party has its message for the coming month. “The message we will keep delivering was set out in that speech,” said a Reeves ally. They also hope the NI line will help with pensioners – even if it has no immediate benefit for them. The challenge is getting it so pensioners see the attack. Which is why Labour took out a full-page attack ad on the issue last month in the pension er friendly Daily Express.
Both the Tories and Labour see the economy as key to election victory. While few in the Tory party believe it is on the verge of a shock win –the main message from No
10’s local election MP briefing this week was simply that the Labour lead was narrower than some polls suggest – a rebounding economy could be the difference between a slim defeat and wipeout.
While Labour is confident they have the upper hand on the economy for now, with the party leading in polls on who voters trust the most, an autumn election could give voters a chance to feel different than they do now. The fact Labour politicians have been so keen to talk up an early election shows that waiting to autumn is not without complications for the Opposition. The Tories’ election strategist Isaac Levido has told Cabinet that by the autumn the economy will be in a stronger place for voters than the summer. As one senior minister puts it: “People’s bills should be starting to come down.”
There is hope that if inflation falls there could be two interest rate cuts by the next election – “That is what would actually help,” said a former cabinet minister – and then there could be an autumn fiscal event.
Both the Tories and Labour see the economy as key to election victory
But as one downbeat Government figure said: “It would be great if we can cut NI again in the autumn, but I don’t think we’ll be thanked. If we gave everyone one thousand quid, it probably would not make a difference to our polling.”
It means there is plenty to suggest the economy is actually turning a corner. It’s just unlikely to be enough for the Tories, given their polling and the financial pain many have had to go through under their watch. As one Treasury figure puts it: “We have not told a positive enough story on the economy and our shepherding of it.”
But even if they did, would it work? Look to America and the problem is clear. The US has had a stronger economic recovery than the UK and Europe. Yet despite record job creation, Joe Biden has a tough fight for re-election. Incumbent governments regardless of right or left are struggling with voters’ economic fatigue, which means Reeves doesn’t even need to accuse the Tories of misleading voters: the economy can noticeably improve, and the governing party can still find itself out in the cold.