Ronald Reagan once quipped that the scariest words in English are: “I’m from the government and I’m here to help.” Yesterday, the British prime minister, faced with the figures that pointed to a deepening economic malaise, promised: “I am totally, 100%, in it and it will turn out well.” Reagan, as our California-based prime minister, would have found it positively sinister.
Still, this was Sunak’s best attempt at sounding reassuring, leaning on his much-touted financial credibility as he addressed another “PM Connect” event at a Kentish Ikea factory. With exposed forearms, the Prime Minister’s Rishi reassuring routine also had a serious economic reason behind it. In an attempt to thwart a catastrophic spiral of inflation, informed by angry consumers chasing runaway price hikes and thereby fueling inflation further, Sunak projected stolidity. But while the behavioral implications of an overheated economy may have called for such a performance, the PM Connect was remarkably flat. You don’t have to be a huge critic of “big government” like Reagan to be skeptical.
Of course Rishi Sunak gloomy wednesday — started by the ONS cost of living bulletin — was followed up on Thursday by the Bank of England’s Monetary Policy Committee raising interest rates to 5%. It was a larger increase than some had expected, but economists have grown accustomed to being caught off guard by Britain’s sui generis stagflation.
It is the 13th time in a row that the BoE’s MPC has raised the bank rate, and inflation has not followed forecasts since January, when Sunak first announced his commitment to halve it. So the routine is familiar: Britain dodges its disinflation target, and the Bank of England responds duly. Economists now expect the base rate to reach 6 percent by the end of the year. It means that if Sunak finally hits his arbitrary inflation target, Britain will have raised interest rates and created angrier mortgage holders in the process.
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Unsurprisingly, Britain’s economic woes were Keir Starmer’s choice topic in Prime Minister’s Questions this week. Pressed on the government’s culpability amid our very British malaise, Sunak retorted: “As always, the honorable gentleman is unaware of the global macroeconomic situation.”
But Sunak’s global blame game clashes with his highly personalized speech 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% in it” and can fix it. The message highlights the broader question of Sunak’s credibility on economic policy, something he has relied so heavily on to complement an ill-defined political identity since October.
The prime minister clearly imagines that he has a mandate to alleviate Britain’s economic ills, as a result of the post-mini-budget political context that brought him to Downing Street. Consequently, the economic indicators on inflation, debt and growth are listed from one to three in their “five commitments” to the government. He raises some deep questions: how does Sunak square this near-total emphasis on his personal mandate to fix Britain, at the same time that he blames global factors for our problems? How does this tone match up with the reality that it is the Bank of England, and not number 10, that has the policy churns most associated with inflation?
James Cleverly, the hapless foreign secretary tasked with media roundup duties on Thursday, will not have helped his boss’s economic argument during his interview with the BBC about the car crash. Challenged six times to say how the prime minister planned to cut price increases, he cleverly stumbled, tongue-tied. Having first quoted interest rates before recalling the independence of the BoE, the foreign secretary could, at best, say: “We are well aware that increasing government borrowing is one of those things that gives laps and increases inflationary pressures”.
Cleverly’s confusion underscores that there is no obvious policy path — other than a mere suspension of voter-winning tax breaks — to alleviate Britain’s inflation problem. (It’s also no secret that a lack of commitment to tax cuts will spur the Trusses still in the Conservative parliamentary party.) Truly, the best government strategy on inflation is to direct your thoughts and prayers directly to Andrew Bailey, or remove him. Squeezing inflation out of the system is, of course, despite Sunak’s oath, the responsibility of the Bank of England.
Ultimately, that is the logical core of Sunak’s economic credibility problem. Halving inflation is promise number one in his precise vision of government: it means failing at it, again Bailey’s summary, essentially handing the next election over to Labour. Sunak therefore finds himself a hostage to his promises. There will be no way to roll around and miss a red line goal like cutting inflation in half by the end of this year.
Indeed, it’s no surprise that, according to a Survation poll, 40 percent of people blame the government for bringing down inflation compared to 39 percent who look to the Bank of England. The prime minister has taken to podiums across the country, with his promise to “halve inflation” written in all caps as a backdrop. It means that while Sunak stands his ground, with no obvious political levers to reach, his economic credibility will slowly erode, sacrificed on the altar of a simplistic New Year’s election gambit.
So while Rishi Sunak subtly vilifies Reagan and says he’s here to help, voters will increasingly connect their worsening family balance sheet with the prime minister’s inaction. Even if the prime minister turns on the Bank of England in the future, the voters will already have found their man to blame.
All told, Sunak will pay a high political price for his inflation-focused election campaign. And I hope we’ll see a lot less of the prime minister’s infamous five promises as Britain’s economic malaise deepens.
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