“Forward, the Light Brigade!”
Was there a man dismayed?
Not though the soldier knew
Someone had blundered.
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die.
Into the Valley of Death
Rode the six hundred.
“The Charge of the Light Brigade” (1854) by Alfred, Lord Tennyson (1809-92)
Surprise Announcement
The date of Britain’s general election, which has been the subject of frenzied speculation since the beginning of this year, is to be 04 July – the day the United States celebrates its independence from the old country. This we learnt on Wednesday last week (22 May) after Prime Minister Sunak had convened an emergency cabinet meeting for which Foreign Secretary Lord Cameron had to fly back from a mission in Albania.
The announcement came as a surprise to most commentators. The prevailing wisdom was that, with inflation falling towards the Bank of England’s target rate of two percent, the Bank would be able to cut interest rates substantially in late summer and that by the autumn these would have fed through into lower monthly mortgage payments for homeowners. More than 1.5 million homeowners are scheduled to re-mortgage over the course of 2024. Similarly, with positive economic growth (at last) there was a good chance that wages would be rising faster than prices come the autumn and people would start to feel better off after two to three years of falling living standards. Moreover, the four percent cut in employees’ national insurance contributions (NICs), delivered over the last two budgets, would be manifest in people’s pay packets.
We knew that the prime minister would not leave the election too late in the day as that would make it look as if he were desperately clinging to power; and a winter election might result in low turnout. There was no chance that he would leave it to the last theoretical date in January and ruin Christmas. But very few commentators thought Mr Sunak would call the election so soon, given Labour’s consistent lead in the opinion polls and the thrashing the Tories took in the 02 May local and mayoral elections in England and Wales. Last Wednesday morning I was still sticking with the prediction I made at the beginning of this year – 10 October; and ex-Chancellor George Osborne was predicting 14 November, as per a recent podcast.
It was reported that a significant body of Conservative backbenchers were unsurprisingly disgruntled by the Prime Minister’s decision. Although 77 of them are stepping down (and that figure keeps rising) most had assumed that they were in situ for another five months. There were even rumours of a plot to topple him in time to reverse the dissolution of parliament. That was obviously a non-starter since Tory MPs – like all MPs – ceased to be MPs when parliament was dissolved, and the 1922 Committee of Tory backbenchers in which such plots are conceived and carried out ceased to exist as a result.
Fraser Nelson, a journalist with his ear to the ground, writing in the Daily Telegraph last Friday, reported that Lord Cameron had described Mr Sunak’s decision in cabinet as “bold”. “Bold” is mandarin-speak for stark raving barmy.
The question arises then – and not just for politics anoraks: Why did Mr Sunak decide to take a massive gamble before he had to? Why would he not have wanted to spend the summer recess recharging his batteries at the prime ministerial residence at Chequers?
Economic backdrop
One reason was clearly that Mr Sunak, who is a finance man, was thrilled by the inflation number reported by the ONS early on Wednesday morning last week. UK inflation in the year to the end of April was just 2.3 percent, down from 3.2 percent the previous month. That means that, after a savage bout of inflation lasting for two-and-a-half years, the UK is enjoying (almost) stable prices, and businesses can therefore plan investments more confidently. Given recent falls in food prices (itself the result of falls in the cost of fertiliser and fuel) and the reduction in OFGEM’s energy price cap, the fall in inflation was expected.
But this inflation number, while welcome, will not spur the Monetary Policy Committee (MPC) of the Bank of England to cut the base rate from its 16-year high of 5.25 percent when the MPC next meets on 20 June – two weeks before the 04 July election. Cuts in rates will most probably come in August (there will be no meeting of the MPC in July) and September – or that is what the futures markets anticipate.
Growth data published last week was also positive. The UK economy grew by 0.6 percent in the first quarter of this year – faster than any other G-7 economy apart from the USA. Alleluia – the UK has escaped recession. “The economy is turning the corner”, said a drenched prime minister in his address outside Number Ten Downing Street.
But perhaps the Prime Minister should have taken a closer look at the figures. The ONS small print revealed that core inflation – which excludes energy and food prices – was still 3.9 percent last month, down from 4.2 percent in March. And wages are rising at around six percent. So, there is yet the danger that inflation might rebound. Remember that the priestly caste of central bankers proclaimed in the second half of 2021 that creeping inflation was “transitory”, yet it turned out to be persistent.
True, business confidence is rising. The latest Purchasing Managers Index (PMI) for May rose from 49.1 to 51.3, a 22-month high. Measures above 50 signal that economic growth is likely. The UK’s services sector PMI fell this month but remains at 52.9, which is well within growth territory. But then the oil price has been soft, despite tensions in the Middle East and reduced traffic through the Bab-el-Mandev straits. That could change. The inflation chart in the USA shows us that the fall in inflation is not necessarily neatly linear.
Political Psychology
Another reason why the Prime Minister might have decided to call the general election early is purely political. Like the prize fighter awaiting a boxing match there must be a strong desire to “bring it on”. He strongly believes in the case for his continued governance, and he wants to share that with the nation. As a result, he is crafting this election as a presidential one: Sunak versus Starmer, rather that the Tories versus Labour. Mr Sunak clearly thinks that Sir Keir Starmer will be unequal to the challenge of the campaign: he hopes to engage him in up to six leaders’ televised debates, the first of which will take place next Tuesday (04 June).
The problem for Mr Sunak is that the nation has not fully bought into the Sunak brand. Indeed, the Tory Party membership, when they were asked their opinion in the summer of 2022, chose Ms Truss ahead of Mr Sunak. The Prime Minister was backed by a desperate Tory parliamentary party only when Ms Truss resigned after 50 days in office. His personal approval ratings have never been impressive and are currently lower than almost any prime minister since records began.
Furthermore, the Tories now face a threat not only from Labour but on the right from Reform UK. It is evident that Reform is not ready for this election even though its leader, Richard Tice, has pledged to contest every constituency in England, Scotland and Wales. Nigel Farage was forced to withdraw from the fray, saying (if I understood his words correctly) that there is another more important election happening on the other side of the Pond. For man who styles himself as a patriot that is odd. Perhaps he hopes to be at the first Biden-Trump TV debate on 27 June.
And then there is illegal immigration in small boats. We learnt last week that people are arriving on the shores of Kent from France in record numbers. It is quite possible that there will be an avalanche of new arrivals over the summer months in warm weather – despite Mr Sunak’s flagship Rwanda policy, which was meant to be a disincentive. Immigration is already the main focus of the election for the European parliament which will play out over 06-09 June.
Not to mention the trickle of the fickle – the Tory MPs who have crossed the floor of the House to join the Labour ranks, and a few to Reform UK. All this has had a pernicious effect on Tory morale and, if it were to continue, might entirely undermine what authority Mr Sunak retains. Better to staunch the loss of blood now, he may have mused.
Then there are the deep-state scandals which keep coming back to discredit the incumbent government: the appalling Post Office injustices; the curse of contaminated blood in the 1980s and 90s; the Grenfell Tower inferno of 2017, the official report on which will be published in September. Of course, Mr Sunak and his team are not responsible for any of these ghastly foul-ups; but they will have to propose meaningful redress, which could provoke controversy.
And there is little chance that Britain’s public services will appreciably improve by the late autumn. NHS waiting lists still are nearly 7.5 million people long; and the police have been advised not to arrest criminals because our prisons are literally full. There is a prevailing sense of drift and decline with little expectation that a Labour government will be able to turn things round. Indeed, there is much evidence that the British public are not particularly enamoured with Sir Keir Starmer’s Labour Party, even as they revile the Tories. It is, electorally speaking, the opposite of MasterChef. Voters are invited to taste not the most delicious item on the menu but the least revolting.
Thus far, the financial markets have taken the surprise announcement in their stride. The FTSE-100 continues to push into record territory, though it closed down at 8,231 last night. The pound is trading at around $1.27 and even hit €1.18 on Wednesday this week – the latter being the highest level for two years. Gilt yields have hardly moved. The 10-year gilt is yielding 4.35 percent this morning – down on levels in mid-April.
But the mood on the streets is underwhelming. Most people I encounter barely mention the forthcoming election, even as the media remind us that it is hugely significant. Many of us regard it as a date in the diary to which we are not particularly looking forward though we know it is important – rather like an appointment with the dentist.
No doubt the campaign will have its moments, but the first week has been deadly dull. But do I detect that a faint sense of relief that a flailing parliament has been put out of its misery? Many Tories will resent the disruption to Wimbledon and to the season of strawberries and cream. Though it is just possible that England will be playing in the Euro quarter-finals scheduled for 5th and 6th July – and that the Tories might benefit thereby from the feel-good factor. Maybe not.
Labour’s Foreign Policy
One area where Labour might trip up is in foreign policy, which – thus far – has not featured in debates. Is Labour too pro-Israel or soft on Hamas? Does it believe that Israel has broken “international law”? What is its policy on Ukraine? Labour wants to get “closer” to the EU – but what does that really mean?
David Lammy, Labour’s prospective foreign secretary has unique diplomatic skills: he manages to offend everybody. The pro-Palestinian mob despises him for not vigorously opposing the war in Gaza – and so does the state of Israel. The Biden White House is uncomfortable with his apparent support for the arrest of Benjamin Netanyahu under and International Criminal Court (ICC) warrant. The Trump campaign will note that Mr Lammy once tweeted that “He [Donald Trump] is a racist, KKK and Nazi sympathiser”. He also compared the Brexit-supporting Tory European Research Group to the Nazis. When challenged on this statement by Andrew Marr, he responded: “I would say that wasn’t strong enough”. Mr Lammy has a reputation across Whitehall and beyond for getting his facts wrong.
Mr Lammy once declared at a speech at Chatham House that a Labour government would recognise Palestine as a state (as Ireland, Norway and Spain have now done). In 2016, he denounced Britain’s Trident deterrent system as “completely useless”, though he has since recented. His careless words may come back to haunt him in the weeks ahead.
Policy Proposals
Thus far, the Tories have come up with three new policy offers. One is the proposal of some form of national service – military or civilian – for 18 year-olds; another is to raise the personal allowance (the threshold above which income tax is liable) for pensioners. And on Tuesday (29 May) the prime minister pledged to abolish “Mikey Mouse” degrees.
The first of these has been percolating around for most of this year as the realisation has dawned that we need to beef up our defences in a more dangerous world. Whether conscripting reluctant youngsters into the armed forces would actually result in greater firepower is debatable. Steve Baker, who is still a Northern Ireland minister, said that mandatory national service was a policy dreamed up by advisors and foisted on candidates.
The second pledge arises given that, with the pension triple lock and frozen personal allowances, the basic state retirement pension (currently £221.20 per week or £11,502.40 per year) will exceed the personal allowance (currently £12,570) by 2028. Thus, all pensioners, even the poorest, would have to pay income tax. (Many already do pay income tax on their private pensions and other sources of income, though not NICs). That is something that would be hugely unpopular for any government, Labour or Conservative. Labour derided this policy as “desperate”, but it is something that should have been enacted already.
Both parties have now pledged not to increase VAT – though Labour is still committed to extend its scope to school fees. There is already some evidence that parents are taking children out of fee-paying schools and placing them in state sector schools.
Whatever the Tories propose Labour chants the mantra of “Tory chaos” because they have been able to blame the Tories for rising mortgage payments – even though rates have risen across Europe and North America since the inflationary tsunami struck in late 2021. Keir Starmer and Rachel Reeves never cease to tell us that the Tories have “crashed the economy” – and most people accept that is true because their living standards have suffered over the last three years. That is why Labour wants to make the economy the key battlefield of the election campaign.
State Of The Polls
The Daily Telegraph Poll Tracker published on Wednesday (29 May) showed Labour on 43.8 percent and the Tories on 23 percent. Despite the slight pip in Tory support since the election was called, Labour is still more than 20 percent ahead. This points to a massive Labour majority in the House of Commons, come 5 July. The number to watch is support for Reform (10.4 percent on Wednesday), which might ease if Mr Sunak performs well in the TV debates. And there are, anecdotally, a lot of undecided voters out there. Labour has some competition at the margins from the Greens in England but looks likely to give the SNP a good hiding in Scotland.
Almost everyone thinks that the Tories will lose this election. The Tory camp itself is divided between those who think that the Tories will sustain a defeat that is survivable (200 seats or more); and those who believe that it will be an extinction event (less than 100 seats). What we Tory sympathisers did not expect was that the party leader and prime minister would decide to charge headlong into the Valley of Death.