Inflation figures have unexpectedly risen to a ten-month high of 3% in January, in yet another headache for Rachel Reeves to contend with. Despite wading past the last political storm and a BBC report on false CV allegations, Reeves has been reminded that the ever present challenge of managing the economy is the issue which matters the most. It is clear Labour are quickly losing the economic narrative and their policy agenda for this government – they must turn the tide, and fast.
The Chancellor will no doubt have to go against Treasury plans to hold one fiscal event per year, as some major corrections will have to be announced in the Spring to ease the tension between the Chancellor, markets and the electorate. A major failing which we have seen with the Chancellor since July is promising something will happen, with the knowledge that the economy is ever-changing. You cannot rule out further tax cuts months before you have to decide whether those tax cuts should commence, as you will find yourself in a political storm of your own making.
These are mistakes which the Conservatives and Reform UK could also bounce off of, with restoring economic credibility being what should be on the forefront of the Tories’ minds going into the years up to the election. Many of these clumsy mistakes by Labour could just be a case of the jitters from a new government, however it cannot continue. Two weeks ago I commented on how Starmer had to take control of the political narrative over the course of the parliament or face the consequences of a lack of authority – likewise, the Chancellor must take control of the economic narrative or face the political consequences.
A quality which the Chancellor must quickly attain is to admit when things are not going well and be open to putting corrective measures forward in a bit to rectify them. It could be that the Chancellor has every intention to do just that but has failed to communicate that to the British public, similar to what Labour did in the months following the general election. If you are open to making corrective fiscal measures, it shouldn’t be that you communicate the complete opposite to the electorate. This is an elementary political mistake which could prove to be costly for Labour if they attain a track record for not being straight with the British public on their economic programme.
It is crucial to change the tone which Starmer has been using at PMQs which is to patronise the Conservatives. It is all well and good doing this around the time of the election, but what the electorate want to see throughout the parliament is responsible government in action, especially from a leader who claimed that the era of political fiascos has come to an end. Labour need to take an approach to pivot away from the image that they are the ones who are damaging the economy whilst not deflecting onto the last government. If they keep using this message it could come across to the electorate that Labour are accusing them of getting it wrong and to the thousands who voted Conservative in 2019.
The most important thing that should be on the government’s agenda, as well as the on the agenda for the rest of the parliament, is to get a hold of these fiscal figures, especially growth forecasts from the IMF and OBR. The one thing which the Tories can always bank on at elections is picking up the pieces from a government who have not managed to grow the economy. Labour should not allow the narrative on the economic front to run away from them whilst they are still in a relatively strong position, despite recent polling. The Telegraph have reported that the recent OBR forecasts have been overly optimistic, which may force the government into taking such action.
The best course of action for the government to take right now is to hold a fiscal event in the Spring, which not only aims to keep inflation at bay, but also promotes their growth agenda. The recent speech from the Chancellor had some good announcement on this basis, however they were all long term projects. Reeves should put in place some shorter-term growth strategies, so people feel the country is recovering financially and to give the government the space they need on the economic front. Through all of Labour’s struggles which will arise over their first period back in government they will realise their biggest issues will not be on social reforms or contending with the trade unions, to quote James Carville – it’s the economy, stupid.
