Britain’s No-Growth Conservatives

Britain's Prime Minister Rishi Sunak. Photo: AFP
Britain's Prime Minister Rishi Sunak. Photo: AFP

Summary

They didn’t defend tax cuts so they’ll have to defend a bad economy in the coming election.

Britain’s Conservative Party faces the nightmare of an election this year after the economy has dipped into recession, and the Tories have no one to blame but themselves. At least their predicament is a warning for others.

The U.K. economy contracted 0.3% in the last three months of 2023, according to data released last week. This is the second consecutive quarterly contraction, the standard benchmark for a recession, and as a result the economy expanded a paltry 0.1% over the full year. By comparison the U.S. grew 2.5% last year.

Prime Minister Rishi Sunak, trailing the opposition Labour Party by double digits in most opinion polls, had hoped to persuade voters the economy has turned a corner before an election expected this year. That corner now seems to be several miles down the road.

Mr. Sunak and Chancellor of the Exchequer Jeremy Hunt may try to blame Mr. Sunak’s immediate predecessor, Liz Truss. Markets for government bonds and the pound went into turmoil after her administration proposed a supply-side tax package in September 2022. This was much less her fault than conventional wisdom claims, but the Tories ousted her after only 49 days in office. Her policies never became law to receive a real economic test.

That was more than a year ago, and Mr. Sunak rode into office promising a more “responsible" path to economic growth built around balancing the government budget. This became a plan by Mr. Hunt to tax the economy back into growth, which is the sort of nonsense voters expect from parties of the left.

Now British voters are stuck with high taxes and slow or no growth. Tax revenue at 36% of GDP is the highest since the immediate aftermath of World War II. Bond yields have exceeded their Truss-era highs for much of Mr. Sunak’s tenure and mortgage interest rates remain elevated. Oh, and the inflation rate remains a sticky 4%.

That’s a record no politician wants to defend. And sure enough, in special elections on Thursday Labour easily flipped two seats that the Tories had held for years. The Tories could still eke out a win in the general election because accidents happen, but Mr. Sunak’s poor economic record leaves him hoping his Labour rival Keir Starmer makes a serious mistake.

The Tories have squandered former Prime Minister Boris Johnson’s 2019 majority because they fell for the idea that tax-and-spend policies and onerous climate regulation would appeal to a coalition of working-class voters in the north and urban Tory wets.

They forgot that one imperative of any conservative government anywhere is the promise of broad prosperity. They have earned their looming political demise.

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