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Lodestone Political Note – Long Road Ahead

June 9th 2023

Most of us have been there. Sat in the tranquil, a little too quiet living room of the very nice home off to which an elderly relative has been shipped. Trying not to let the wince show when they forget our name. Smiling encouragingly as they re-tell an anecdote we have heard a thousand times. Talking a little louder, a little slower than usual in the hope that they will both hear and understand us. The mind wondering to irritating thoughts that won’t go away - ‘how long before I can politely leave?’, ‘this won’t happen to me, will it?’, ‘I wonder if I’m still in the will?’.


Rishi Sunak met President Biden this week - the Prime Minister’s first visit to the White House. The two discussed Russia’s invasion of Ukraine, the energy transition, the future of the alliance and how to regulate AI. For Sunak, the painful encounter reaped some political dividends. He enjoyed the hospitality and the associated reflective glory of an ageing super-power. He demonstrated that something shiny remains about British power, even after a decade of domestic chaos. He secured a special conference in AI - which he believes is a challenge that helps differentiate his appeal (bouncy tech-bro) from that of the Labour leader (stolid public servant). He convinced himself, and perhaps the part of the country that was paying attention, that we are, still, in the will.

But does any of it make any electoral difference? Back home, whilst Rishi grinned and Biden read haltingly from cue cards, HSBC withdrew all its available mortgage products from the market. Inflation remains high, despite the best efforts of the Bank of England, and so lenders presume that rates will once again have to be hiked. There are millions of British people - the sort of people who have lived out the Conservative dream of working hard, borrowing big and buying their own home - who now face potential ruin thanks to the surging cost of borrowing. Their mortgages are up, dramatically. Their weekly shop is up, perniciously. They are materially poorer. That matters and, it is safe to say, it matters rather more to more people than, for example, the medium-term impact of ChatGPT.

This is the challenge that faces the Conservative Party. They have boxed themselves in, in part through their own incompetence. They can buy barges to house migrants, and they can sit down with presidents, but they have to push down the cost-of-living if they expect a hearing on any of that.

But it is a challenge, too, for Starmer’s Labour. In 1997, with the economy on the up, Britain voted for Labour because they felt they had the luxury of being able to do so. People’s economic circumstances were improving, and they decided that they would quite like public services to improve too. They were reassured by Blair and by Brown that whilst the profits of growth would be invested more progressively, prudence would be their watch-word. We are no longer assured of growth in the short-term and Labour therefore cannot claim that the investments it intends to make (for example, the £28 billion a year into green infrastructure) will be paid out from the proceeds of collective success. Instead, they intend to borrow that money. This week we saw the capital that the Tories intend to make from that promise - threatening that this plan may end up costing UK households £1000 a year each.

Of course, the natural retort to these attach lines is simply to roll one’s eyes at the sheer cheeky chutzpah of it all. As Angela Rayner said at Deputy Prime Minister’s Questions this week, when this line was used on her, ‘Britain can’t afford any more of this government’. But the Government is betting that they will earn credit for cleaning up the mess created by their colleagues and that a tired, poor and frightened nation will have pause for thought before voting for a party that is signalling plans as grand and (in their view) ideological as were Liz Truss’s.

That was the dilemma that faces Keir Starmer and Rachel Reeves. To try to win a mandate for radical investment, with the risk that it frightens away their poll lead? Or to narrow their ambitions to reassure voters, risking boxing themselves into a policy perspective that isn’t radical enough to produce change? The decision they made this morning was that it was too big, too scary a gamble to bet on the public having the appetite for potential further upheaval on the global markets. Rachel Reeves demonstrated ruthless caution by rowing Labour back from the figures it had committed to. Whilst the party will still ‘ramp up spending’ on infrastructure, Reeves has decided not to allow her party to be hoisted by the petard of a particular figure. In doing so, she and her leader have signalled that they won’t allow the ideal to be the enemy of eventual success. They are intent that when their grandchildren visit them - long into the future - in some pleasant and tranquil living room they will be able to regale them with anecdotes about their time in office rather than with regrets about how they fell at the final hurdle.

But for all that Reeves has - to use the words of Lyndon Crosby - ‘cleared some barnacles off the boat’, this move also begs some questions. A great number of the Shadow Cabinet - and not just Ed Miliband, whose baby the investment plan was - are both angry and afraid. They worry that Reeves’s caution is overdone and that the public wants to see some vision and a practical explanation of Labour’s values. At some point, their argument runs, Labour will need to lend some definition to its proposition. It is good and proper to signal to voters that Labour won’t do anything silly, but they can’t leave permanently unanswered the question of what they will do instead.