It’s payback time for voters

It won’t be much comfort to Rishi Sunak, but he’s not the only world leader being put to the electoral sword. Joe Biden will be lucky to survive the summer as the Democrats’ presidential nominee after his disastrous debate performance. Almost every opinion poll says he’s losing to Donald Trump. In France, Emmanuel Macron bet on a snap election, daring his country to vote for Marine Le Pen’s National Rally. Voters accepted that bet and are making the French President pay. This weekend we could see Jordan Bardella, 28, asked to become the next prime minister. Justin Trudeau looks doomed as Prime Minister of Canada. Around the world, leaders are facing a reckoning.

Not so long ago, the reverse was true. Government approval ratings soared during the pandemic and the accompanying lockdowns. When Jacinda Ardern won by a landslide in October 2020, New Zealand’s borders remained shut to outsiders. Businesses were being offered government support to help keep them afloat, while those isolating with Covid were being paid up to $600 a week to stay at home. This was the great new offer to voters: protection from everything, including viruses, unemployment and economic downturns.

The public were more than happy to accept this new deal. Then the bill finally came in and the price – inflation – was too high. Jacinda-mania evaporated. Ardern and her party tanked in the polls and were looking down the barrel of defeat. ‘Bring it on,’ Ardern told supporters at a party conference just two years after her historic win. It was a hollow rallying cry. Three months later, she resigned.

It’s a similar story in Canada. Canadians re-elected Trudeau in September 2021, in the dying days of lockdown gratitude, and also before the bill landed. Canada’s Conservatives now look on course to defeat him.

In Britain, the start of the pandemic saw the Tory party secure a net-positive approval rating for the first time in a decade. Going into this week’s election, support for the party had sunk to its lowest level in 45 years.

Voters do not seem to be rejecting left- wing or right-wing politics. Parties in both camps are in big trouble. What matters is how many broken promises trail behind the various leaders who stoked expectations about how much the state could offer its citizens. That security illusion has been shattered in the post-Covid years, and the public want politicians to see the light too. For millions of voters around the world, polling day has become payback day.

The public has been dealing with the curse of inflation. There is a good reason politicians fear price spirals: inflation is like a tiger, as Friedrich Hayek noted, that runs rampant once unleashed. It destroys living standards and purchasing power. It acts as the most destructive tax. In France, inflation peaked at 6.3 per cent; in the United States, 9.1 per cent; and in the UK a staggering 11.1 per cent. And while inflation in Britain has come down to the Bank of England’s 2 per cent target, mortgage payments remain significantly higher. Voters are not quick to forgive or forget when such a devastating economic phenomenon occurs.

What’s worse, people have felt sidelined. Inflation was never mentioned to them by prime ministers or presidents as a potential consequence of Covid policies and all the money-printing that paid for them. Trade-offs were rarely mentioned at all.

Behind the scenes, Sunak knew inflation could destroy the recovery, which is why he tried to prepare for its effects during his time in the Treasury. But this had to be done unostentatiously. Under Boris Johnson’s government, to talk about consequences of massive government spending was seen as defeatism.

For almost two years, Sunak was the main voice in the cabinet urging the prime minister to think about those economic consequences. Covid policies inevitably meant tax hikes: on corporations and on workers, millions of whom have been lifted into higher tax brackets thanks to freezes on tax thresholds. This is especially bad news for the party which insists that it is cutting tax, taking 4p off employee National Insurance over the past eight months. But the overall tax burden has continued to rise and is on track to reach record levels in the next parliament.

Governments that were recently all-powerful have been depleted. Ministers could tell the public to stay home during the pandemic. They could tell them to protect their health services, and decide where they could and could not go depending on their vaccine status. But they can’t force them to believe they are better off. This is acutely painful for Joe Biden, who has presided over heroic rates of growth. The US economy is now 7.1 per cent bigger, per capita, than it was pre-pandemic. Most politicians would give a limb for anything resembling that success: Germany’s economy, per capita, is 1.5 per cent smaller. In the UK, it’s 1.1 per cent smaller.

On paper, America has done superbly. But Americans aren’t feeling great about their prospects. They know Biden’s multiple stimulus packages created a sugar rush across the US economy, and they’re not convinced they’ve benefited from all the subsidies and payouts. Gallup’s most recent survey shows that, last month, nearly half of respondents ranked the state of the US economy as ‘poor’. Politicians lament the ‘voteless recovery’ – a widespread lack of appreciation for their efforts to get economies moving again.

But while the inflation rate may be back to normal, prices remain much higher. Voters understand how far their pay slips stretch. They can see when their tax bill goes up.

Immigration has become one of the main focal points across this year’s elections, precisely because of the outlandish and undeliverable governmental pledges. Every Tory manifesto since 2010 has promised a reduction in migration: under David Cameron, this included an unrealistic and economically illiterate plan to reduce net migration to ‘tens of thousands’ of people a year. Under Johnson, it was a vague promise of reduction. The Brexit slogan of ‘taking back control’ was used by Johnson and others to indicate that net migration would fall significantly after Britain left the European Union. Instead Johnson used Brexit powers to set up a far more liberal system that saw net migration skyrocket, peaking at 764,000 in 2022.

The case was never made for the merits of higher net migration. Instead politicians promised one outcome, while crafting public policy that led to something radically different. Biden insisted from the start of his presidency that he would get a grip on the US-Mexico border. He then delayed taking serious action for years. This inertia meant monthly border crossings hit an all-time high on his watch: 302,000 last December. Meanwhile, Rishi Sunak promised he could ‘stop the boats’ using a deterrent that would take just 300 migrants out of the UK. More small boats have arrived this year so far than in any other.

The calculation politicians are making as they head into the elections seems to be that it’s better to keep up the facade rather than level with the public about the problems facing western democracies. When the public’s expectations of their governments rise, politicians’ promises rise accordingly. They pledge whatever they think voters want to hear, vowing to protect the public from the costs of social care, childcare and higher energy bills. When, inevitably, leaders can’t deliver limitless security, the backlash begins.

Macron has learned this lesson the painful way. He knows that the French welfare state cannot afford to pay pensions from the age of 62. His decision to raise the threshold to just 64 led to riots and perhaps unrecoverable damage to his leadership. He saw the battle as one between fairy tales and realism. These are also the kind of hard truths Sunak likes to talk about, but rarely gets much credit for mentioning.

In response to such attempts to scale back endless promises, the opposition picks up where the incumbents left off and they promise even more. In this weekend’s elections in France, the populist parties are promising to revise the pension age back down. The National Rally was insisting on more debt-fuelled spending – until it had to dilute these promises somewhat, due to the market having jitters. In America, Trump has suggested a 10 per cent import tax to boost his ‘America First’ credentials.

In the UK, Reform sees the Tories’ tax-cutting pledge of £17 billion and raises its pledge to £90 billion – plus an additional £50 billion for more spending. That’s reminiscent of Liz Truss’s infamous ‘mini–Budget’, which sent markets spiralling.

Labour says it will do everything better by virtue of simply not being the Tories. But a change of government won’t magically fill the black holes in the public finances in the next parliament, nor conjure up the thousands of additional medical staff needed for the NHS. In Britain, France and America, state spending in cash terms is at the highest levels on record. Taxes are not far behind. The problem has not been an absent state, but an all-encompassing one, which promised voters everything and left them acutely aware of the shortcomings.

Sunak has been reminding voters these past few weeks that he was right about the dangers of Truss’s economic agenda – the suggestion being that he will be right about Starmer’s too. Some Tory MPs think that it’s time to let Starmer wrestle with – and be devoured by – the same issues, so voters can see for themselves that the country’s problems are not merely party political.

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This may be Macron’s strategy, too: to give Le Pen’s party power in parliament and a record to defend, so it stands less of a chance of succeeding him in the 2027 presidential elections.

In the European elections this spring, the populist vote share fell in countries where they were already in power, including in Hungary and Poland. It seems that the idea of populism is more appealing to voters than the introduction of populist policies.

But this is another gamble, and the incumbents don’t have a great betting record. Both Sunak and Macron decided that in calling early elections they were forcing a choice. Biden took a similar gamble by pushing for an early debate with Trump – to make voters see, with months to go, who the real statesman was. Surely they wouldn’t pick the convicted felon?

Voters may form a dalliance with the opposition, but on polling day they’ll stick with the devil they know, won’t they? No, it turns out, they won’t. They take the punt.

But what happens when the next round of promises are broken? To say that there are limits to what a government can do has become anathema to most politicians. To admit that government has grown out of all proportion to its usefulness is seen as a hard sell on the doorstep. When the public are let down once again, where will they turn next?