Matthew Oulton discusses why Labour need to regain economic credibility in order to challenge the Conservatives in 2024.
As we take our first steps into 2021, the UK economy is in its worst state in living memory. Covid-19 has caused a recession of extraordinary proportions, creating more short-term disruption than the Global Financial Crisis and threatening more long-term economic damage than the Great Depression. The public finances will rapidly become a significant concern, with this year’s deficit likely to be the largest in British peacetime. Our pursuit of a hard Brexit looms over the economy, promising both the potential of disruption to trade over the next few months and permanently depressed growth.
On the face of it, things don’t look good for the Conservatives.
We could conclude, like Labour did in 2010, that the electorate will hold the Tories at least somewhat accountable for the collapse they’ve overseen. Unfortunately, the interaction of politics and the economy is not as simple as a national game of musical chairs, with the party in power at the time of the crash taking all the heat.
The economic chaos is certainly cutting through – it has risen dramatically in polling of the most important issue to Britons since the election in 2019. Typically, the Labour Party trails in the polls on the handling of the economy. Just as Labour benefits when voters concentrate on issues that Labour often lead on – health and education, for example – increased focus on economic issues may well persuade voters to remain with the Conservatives. Many voters, both swing voters and people who normally vote Labour, trust the Conservatives more with the British economy. Paradoxically, the failure of the Conservative economic response alone won’t lead to a Labour victory in 2024.
To some degree, this makes sense. Although the same defence didn’t help Gordon Brown after 2008, the Conservatives didn’t cause Covid-19. They can hardly be held entirely accountable for the performance of the economy at the moment. Likewise, many of the measures they brought in were immensely popular, especially in the beginning of the outbreak. Labour need to give a clear, positive economic message explaining to the country what aspects of the crisis the Conservatives were dealt, what aspects they caused, and, crucially, what a Labour Government will do to fix this mess. It is not enough for Labour to point out the failings of the Tories, we also have to convince them that we are the solution.
Firstly, this means a plan to navigate the short-run damage wrought by the pandemic. This might seem pointless – the election is 4 years away – but if we don’t lay out a clear alternative now, Labour will seem like we’re responding only in hindsight. We also need to couple this with a positive plan for how to prevent a crisis like this in the future. The country needs to believe that Labour will help the country recover and restore prosperity. The reliance by successive Conservative governments on ‘just about managing’ people and institutions has left us extremely vulnerable to shocks like this. The student who already maxed-out their credit card in March, the school that already lacked adequate funding, the hospital that already had too few nurses have all been let down by the Tories. We can’t control when we’re hit by economic storms, but we didn’t need to build our house out of straw either.
Fiscal prudence is also vital. In the short term, governments of any stripe are going to need to continue with a relatively large level of spending in order to maintain demand. The exceptionally low gilt interest rates at the moment should allay any immediate concerns about the public finances, but eventually, we will need to turn our attention to them. On this, Labour has a long battle to regain public trust.
In 1997, Labour managed to close the gap on the question of the economy drastically, though they never pulled ahead. This was through a combination of solid commitments on tax and borrowing, and the powerful figure of Gordon Brown. His prominent role in the Labour Party gave him very strong name recognition among the public and established him as a dominant second figure behind Tony Blair. At present, YouGov suggest that Anneliese Dodds, Shadow Chancellor, is only recognised by 29% of the public, whilst John McDonnell is only at 50%, despite 4 years in the role. A much higher degree of cut-through will be required if Labour is to challenge Conservative dominance on the issue of the economy.
Facing these headwinds, it might feel impossible for Labour to succeed. Conservatives certainly have a significant public opinion advantage when it comes to the economy. However, as we enter a turbulent period for the UK economy, it’s obvious that without good standing on this issue, Labour cannot win. Starmer and the rest of the front bench have to work rapidly to at least neutralise this advantage. Economic issues must be an absolute focus. The British people do not need to be convinced on the need for better schools, a stronger NHS, and a more just society – we just have to convince them that Labour can deliver them without ruining our economy.
From Merseyside, Matthew is an Economics Student. He writes frequently on economic issues and is on the Executive Committee for the Economy and Finance Network. In his spare time, he worries about the Red Wall and daydreams about a Labour Government. He tweets at @matthewoulton