Rishi Sunak began this year with a round of compromises in a deliberate effort to shape the terrain on which the upcoming elections will be held.
Vowing to halve inflation, grow the economy, reduce debt, cut NHS waiting lists and “stop the ships”, the prime minister claimed he was speaking out the “people’s priorities”. But the opportunism behind the oath was obvious: the prime minister was setting up some classic Conservative calling cards in a bid to challenge the as-yet-untested Starmerite electoral machine.
Promises are also the essential tone of Sunakian. By the time the next election comes around, the prime minister will want to signal his January promises, proclaim success and persuade voters that such a record delivery clinches the Conservatives’ case for a fifth term. That’s the nature of PM Bullet Point Politics Theory.
Thus, “halving inflation”—the first of Sunak’s promises—is deliberately politically insensitive, and many economists suggest the prime minister has set a manifestly modest target. Economists know that the rate of price increases will eventually fall without any change in the Treasury’s fiscal levers; still, taking credit for a cooler economy early in January, Sunak saw an electoral windfall.
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However, with today’s news that UK inflation was stubbornly holding at 8.7% in May, Sunak’s task has become much more difficult. Price gains continue to defy forecasts with core inflation, a measure that excludes volatile items like food and energy prices, actually growing to 7.1 percent in May, compared with 6.8 percent in April.
So May is another month where the rate of price increases in the UK has been much higher than anticipated. Sunak knows he has special incentives to keep up with inflation, as a consequence of his consummate New Year’s oath. But today’s figures raise the question: is the prime minister failing on his most achievable promise of government?
At the moment, the Labor approach is to try to make a link between price rises and rising mortgage costs in the aftermath of the Liz Truss ‘mini’ budget catastrophe.
“Mortgage products are being phased out and replaced with much higher interest rate mortgages,” Shadow Chancellor Rachel Reeves told the House of Commons yesterday. “This is a consequence of last year’s conservative mini-budget and 13 years of economic failure with higher inflation here than in similar countries.”
Naturally, Chancellor Jeremy Hunt today vowed to wring “every last drop of high inflation out of the economy.” But the implications of even tighter fiscal policy, coupled with rising interest rates, spell disaster for the No. 10’s political prospects.
With inflation still showing no sign of abating, and with millions of people in Britain struggling with the cost of living and facing sky-high mortgage payments, the Bank of England is expected to raise the base rate yet again. It could push interest rates to a level not seen in more than two decades.
So even if Sunak hits his modest goal of cutting inflation in half, interest rates will have to be higher than initially expected to achieve it. In the end, interest rate hikes and a barrage of attacks over a “conservative mortgage penalty” will largely dwarf any political windfall Sunak reaps from finally hitting his arbitrary inflation target.
It means that while the news about price increases may improve a bit over the summer, Sunak’s political prospects will not. The prime minister appears willing to pay a high price for his inflation-laden election campaign.
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