Election Week 4
Labour still likely win
Following the fourth full week of the general election campaign and ahead of tonight’s (20 June) four way leadership TV debate, our views are below. We will continue sending this as a weekly product until the next Cabinet is appointed.
Our view:
The Conservative Party have largely moved against PM Sunak, deciding he will be the owner of their likely electoral loss. Many Conservative PPCs are turning away PM visits to their constituencies, as much of the next parliamentary party tries to distance itself from the PM and instead focus their efforts on shaping the post-Sunak party.
The paper-based media has begun to question and criticise the Labour Party’s governance plans. This is a significant shift, as journalists become less concerned about access to Labour intel and sources, and shift into their primary role of spreading and scrutinising government policy.
Labour has begun to normalise the view that taxes will rise as they adopt a more interventionist governance stance than the incumbent Conservatives. This will likely have a negative effect on growth in the short term but if investment follows, could boost growth in the medium term. Labour will likely hold a fiscal event i.e. a Budget, in the autumn, ahead of a spending review in Spring 2025.
Reform has likely hit an “acceptability ceiling” as several candidates’ less palatable views have become known. This will likely put a cap on their support. The party is still likely to pick up seats at the election, including in Clacton where party leader Nigel Farage is running.
Lib Dem, Green, and SNP manifestos have gotten significantly less coverage than the Conservatives or Labour, but some of their policies will likely be adopted by the Labour Party to avoid any early legislative headaches in a Parliament with more minor party representation.
Our broader views:
The election campaign has entered its last phase as all parties attack each other’s election manifestoes
Political parties’ manifestoes serve as both blueprint and direction of travel for governance. Neither of the main political parties’ manifestos have led to a polling bump, but instead seem to have given a boost to Reform’s polling support, which has also benefited from Nigel Farage joining as leader. Interestingly, Labour has lost about 10% of its polling support, or roughly four polling points, over the past month. Although this would normally be a cause for concern, the Conservatives have shed slightly more. The main beneficiary has been Reform, which is sitting at roughly 16%, underpinning Farage’s recent claims for Reform being the “opposition party” i.e. the second largest parliamentary party.
Labour has started to soften the ground for tax rises and slower growth as the media begins to scrutinise their plans
The Conservatives’ polling numbers have worsened during the course of the election campaign, allowing journalists to take a less risk-averse stance towards scrutinising Labour’s policy platform. This, alongside Labour’s election manifesto launch on 13 June, has made it increasingly clear that Labour intends to increase certain taxes, create new ones, and change the UK’s overall fiscal rules to allow for higher levels of debt and spending. Without an immediate spending increases, which will likely require a fiscal event and primary legislation, the main effect of Labour’s initial policy announcements will likely be higher debt interest costs as government debt becomes more expensive to service, eating into overall public sector spending, higher interest rates for longer as monetary policy has to offset inflationary spending and price growth due to higher rates of taxation, and potentially higher rates of business investment in sectors that Labour intends to make more business friendly, such as renewables.
Barring any tax cuts, which Labour has implicitly ruled out by focusing on which taxes they have promised not to raise, growth is likely to be lower in the short-term, at least until Labour undertakes a fiscal event i.e. a Budget, and a spending review, where they can increase public sector spending and bring in more business friendly policies. In anticipation of this, Labour has begun to campaign on the idea that “it will take time to bring growth back after the damage the Conservatives have done,” as a way of getting ahead of their initial growth-hurting policies.
Labour will be the new “baddies” in Scotland as the party seeks to limit the growth of the North Sea energy sector
Key elements of the SNP’s manifesto, launched on 19 June, should best be considered as an early attempt to transition their resistance to Westminster rule away from the incumbent Conservatives and towards the likely incoming Labour government, which is predicted to become the dominant Scottish party in Westminster as well as the next UK government. A key dividing line between the two parties has been North Sea energy policy, where rules are made in Westminster, but the effects are mainly felt in Scotland. The SNP has therefore published a more pro-energy sector position than Labour’s anti-North Sea approach (reconfirmed in its manifesto last week), arguing that any decisions must take account of energy security and made on an evidence-led, case-by-case basis, carving themselves out a space to criticise Labour as the new Westminster “baddy.” Given a significant chunk of Labour’s North Sea policy will rely on primary legislation, the SNP and the Conservatives will likely campaign aggressively against Labour’s policies and the detrimental effects they will likely have on the Scottish economy during any legislative journey.
Labour has so far demonstrated resolve to keep their North Sea policy platform in place, but have also shown difficulty defending it in the media (even before the paper-based media pivoted from relationship building to soft scrutiny and criticism). Labour’s ability to bring about some of the more damaging policies, such as closing of investment allowances (already shown to be unworkable in other markets and not a part of the policy framework in Norway, which Labour points to as the archetype for these decisions), will be constrained by the eventual size and composition of its majority. If it wins a large number of Scottish seats, there could also be internal resistance to policy moves that hurt its renewed voter base in Scotland.
What to look for next:
Will Labour and the Conservatives’ vote shares continue to slide
Both parties have seen a month-long fall in support. Although it is unlikely to hurt Labour’s result too much, it could mean outsized damage to the Conservatives’ eventual seat share.
Whether Starmer has a better performance at next week’s head-to-head leadership debate
Following a shaky first performance against PM Sunak, which was quickly overshadowed by the latter’s decision to leave D-Day celebrations early, Starmer will need to show better statesmanship and build on his clear ability to connect with audience members.
Whether Labour has any scandals
As campaign fatigue sets in in earnest, mistakes start to get made, which can have outsized effects close to the 4 July polling day. The Conservatives have suffered relentless scrutiny of their recent gambling on the election date scandal, so they will attempt ot draw attention to any Labour scandal of a similar nature.