Ever since 2015 and the Tory election victory that triggered the European Union referendum, politics in Britain has been dominated by the question of control. First, there was the argument over “taking back control” from Europe that won the 2016 vote. Then followed the disputes between Theresa May, Boris Johnson and parliament over the means of our departure from the EU — namely who got to determine how Brexit happened, if at all. Now the prime minister is engaged in a great “levelling up”, which is about Westminster doling out money to the regions without giving them control over how it is spent. Even the battle against Covid was framed like this: “Control the virus, save lives.”
Considering the importance of “control”, the prospect of inflation running away from its 2 per cent target is a worrying one for the government. Shortages have already led motorists to queue at petrol stations as others stealthily buy the Christmas turkey in October. If the Office for Budget Responsibility is correct in suggesting that CPI inflation will hit 4 per cent next year, the Conservatives’ grip on public opinion will surely be at risk, along with their poll lead over Labour, already shrinking after a post-vaccine high in June.
Some in business may be feeling a certain amount of schadenfreude. It was only a month ago that even prominent Leave-supporting business leaders such as Lord Wolfson of Aspley Guise, the chief executive of Next, were being blasted by ministers for warning about rising prices. They were compared with drug addicts, “mainlining” cheap labour, always looking to “just pull the big lever marked uncontrolled immigration”. Tied up in the dispute was the idea that elite British business was still sore over Brexit, considering its general opposition to the idea of “taking back control” from Brussels over the past five years.
However, businesses would be wrong to feel complacent and to expect voters to direct their ire only at the government for the rising cost of living. Research conducted by Savanta ComRes for Global Counsel at the start of the recent surge in inflation in September shows that the public is just as likely to hold business culpable for price rises as the government: 74 per cent of adults consider businesses to be responsible for increasing costs, the same proportion as hold politicians liable. Fewer than one in ten thought price rises were down solely to covering higher outlays; 82 per cent thought that companies’ desire to increase profits was also part of the picture.
So those in the private sector should be careful about thinking that a cost-of-living crisis will take the shine off the Conservatives alone and will leave corporate reputations intact. Instead, shrewd businesses will be thinking about how they explain price rises to customers, as well as doing the basics of trying to control input costs, where they can, in the first place.
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The smartest businesses also will realise that trying to conduct a political argument on this issue will only end up with one winner: the politicians. If last week’s budget showed us anything, it is that Boris Johnson and Rishi Sunak can control the airwaves better than any of their predecessors since Blair and Brown. Britain’s business leaders do not have the same skills, or the same relationship with voters, to change how the government is perceived.
Instead, the Conservatives’ ability to manage a cost-of-living crisis will be down to two factors, neither of which are entirely in their control. First, how the Bank of England plays its hand in the coming months, both in terms of rate-setting and the communication of its rationale to markets and voters. Second, whether voters sour on the idea of tax rises to pay for the NHS once national insurance contributions increase in the spring. Should either of these go badly for the government, taking back control of the debate will be easier said than done.
Alex Dawson is the practice lead, UK politics and policy, at Global Counsel
