Good morning from New Economy Brief.

The general election campaign is underway and the economy is centre stage, with both major parties offering their own version of ‘economic security’ to voters. 

Five years ago, Boris Johnson’s Conservative Party was elected to ‘get Brexit done’, level up the country and invest in a series of new hospitals and ‘shovel ready’ infrastructure projects, amongst other things. 

But after a global pandemic, two major outbreaks of conflict in Eastern Europe and the Middle East, a cost of living crisis and a short-lived experiment with Trussonomics, household finances have been notably unstable since the Conservatives took office.

It’s no surprise that economic security is so high on voters’ agendas. Today we examine the different ways both major parties are proposing to create a more secure economy and improve the resilience of the voters' personal finances. 

It’s the economy, stupid! 

The economy is one of UK voters’ top priorities, and since the cost of living crisis began, perceptions of the Conservatives' economic competence has tanked, with Labour now overtaking them on this crucial metric. The biggest poll movement so far this parliament came in the aftermath of the Truss premiership, when voters began to link the spiralling cost of living to economic mismanagement, a perception that Rishi Sunak has found difficult to shake off.

Key voters long for economic security. Centre-right think tank Onward identified ‘Workington Man’ as the swing ‘red wall’ voter whose support won the Conservatives the 2019 General Election, noting a “sea change in British politics away from freedom and towards security”. Looking at 2024, Labour Together has identified ‘Stevenage Woman’ as the swing voter Labour needs in order to win the general election, and found that she could be won over with “a politics grounded in providing ‘security’ in the form of secure work, safe streets and a strong nation”. 

What is economic security?  Graeme Cooke (formerly of the Joseph Rowntree Foundation, now at Labour) explains that the concept of economic security is “rooted in household finances”, how voters interact with income, costs, assets and debt, but also how wider factors such as employment, housing, education and health affect households exposure to risks (“concrete, everyday experiences” such as “a cancelled shift, an unexpected rent hike…childcare falling through…rising borrowing costs”). Given these economic and political realities, it is not hard to see why both major parties have made economic security the central theme of their campaigns so far.  

And who can deliver it? In his Downing Street address calling the election, Rishi Sunak said that he “came to office above all to restore economic stability” and the Guardian reports that a ‘senior Conservative official’ said “everything in the campaign falls under the ‘security’ banner…that will be mostly about the economy”. Similarly, on Monday, Keir Starmer's first speech of the campaign trail argued “the very foundation of any good government is economic security”.

The Conservative approach: ‘stick to the plan’.

The central Conservative argument in this campaign is that the key to restoring economic security is to ‘stick to the plan’ which they argue is working. This is the logic for hooking the launch of the campaign on to the falling headline inflation numbers. 

What is that plan? In Government, the Conservatives’ strategy to deal with the cost of living crisis centred around the introduction of the Energy Price Guarantee to limit the worst effects of higher energy bills (it should be noted that this decision was taken by Truss rather than Sunak), increasing the minimum wage and uprating benefits in line with inflation. Any remaining ‘fiscal space’ is largely earmarked for tax cuts, (particularly national insurance) which are framed as a policy to support households with the cost of living, whilst arguing that Labour will inevitably raise taxes and cannot be trusted with the public finances. The Conservatives argue that any government spending or higher borrowing will inject inflationary pressure into the economy, so more support is conditional on waiting for inflation to fall. 

Pitting net zero against the cost of living. Since 2019 the Conservative government’s support for net zero has also appeared to waver. Progress on many targets has stalled despite Johnson’s initial enthusiasm in the early days of the parliament. Last year, Rishi Sunak appeared to champion a new strategy to pit faster action on decarbonisation against action to reduce the cost of living for voters - which ultimately ended in delaying plans to ban new petrol and diesel cars, as well as gas boilers. This strategy was perceived to have succeeded in the Uxbridge by-election, but hasn’t led to any noticeable recovery since then and fared badly in the recent local elections. Nevertheless, it is likely the Conservatives will continue to play climate action and the cost of living off against each other in the campaign. 

Is it working? Ultimately, a message that the plan is working only lands if people actually feel it. Many voters, however, seem unconvinced and remain financially insecure. The “good news” about headline inflation and ministers insisting that the economy is “turning a corner” is simply not enough to cut through the financial pain that families feel all over the country are feeling. Polling from Stop the Squeeze shows that an overwhelming majority of nearly 90% think there is still a cost of living crisis, despite falling inflation. Furthermore, only 24% of the public think that the government is responsible for falling headline inflation, and less than 30% think tax cuts should be a priority area for action on the cost of living. (See last week’s New Economy Brief for more on this). 

Labour’s approach: ‘securonomics’.

Labour will be arguing that, in order to restore stability, the country needs to change both its government and the role of the state. Essentially, they argue that in a more unstable world, there is a need for a more active state to protect the domestic economy from disruptive inflationary forces (e.g. from climate change or geopolitics) and to use industrial policy to create new jobs and investment opportunities. They plan to invest in a green industrial strategy to increase the resilience of supply chains and increase the productive capacity of the economy to deal with energy price shocks, all through the prism of a ‘Mission-driven’ government. (Rachel Reeves provided more detail in A New Business Model for Britain: Building Economic Strength in an Age of Insecurity. Read our previous New Economy Brief for more explainers on how Labour is taking inspiration from green industrial strategy in the US). 

More resilient and sustainable economy = more resilient personal finances. In contrast to the Conservatives, the Guardian reports that Labour will be doubling down on their approach to climate change as a clear dividing line between them and the Conservatives: “Labour has long sought to show that pursuing net zero is a source of economic growth and will bring down the cost of living, especially for poorer families, through cheaper renewable energy and home insulation.” Polling from GSCC’s Steve Akehurst and IPPR’s Luke Murphy suggests that this message can be popular with voters, especially when framed around energy security and lowering energy bills.

Decarbonisation on the cheap? However, a couple of big questions remain for Labour. The first is how possible this transformation is within their fiscal framework. Labour have suggested they will maintain the government’s current fiscal rule to have public debt falling within five years. This will limit the amount Labour can borrow to achieve its plans. If they win, Rachel Reeves has pledged to tweak the fiscal rules, for example to distinguish between current spending and capital investment, but whilst the overall debt rule is still active, their programme risks lacking the funding required to succeed. The second risk is whether, and how quickly, voters will start to feel the effects. Capital investment might raise the headline growth rate of the economy, but it might take a long time for the public to feel the benefits in their wallets. In the middle of a cost of living crisis, will voters be expecting more immediate support from their next government?

Weekly Updates

Election Roundup

The Absolute State of the British Economy. Economist James Meadway explores the economic inheritance of a potential future Labour government in a piece for Rosa Luxemberg Stiftung.

Intergenerational fairness. Following Conservative announcements of national service for teenagers and a “triple lock plus” for pensioners, this has already been dubbed a “boomer election”. The Intergenerational Foundation has published a manifesto, with proposals for how the 2024 General Election can be “an opportunity to remake that intergenerational contract”. 

Fixing the NHS. Labour adopts a proposal from the Institute for Public Policy Research to adopt a weekend and evening NHS service to tackle long waiting lists. (Responding to Labour’s announcement, the Institute for Fiscal Studies doubts the elective backlog can be fixed within one parliamentary term and without large spending increases in healthcare.)

Will Labour raise taxes? The New Statesman’s Will Dunn explains why it is “dishonest to pretend that anyone is going to be able to “cut taxes” in any real sense in the next parliament”. 

Quantitative Tightening and the next government’s spending power. The Financial Times’ Toby Nangle explains why it “cannot be right” for the decisions of the Bank of England’s Monetary Policy Committee to define fiscal space (read our previous New Economy Brief for an explanation of how the speed of Quantitative Tightening limits the spending power of the next Government).