The collapse in Conservative support in this parliament has been so precipitous that it is hard to see how the party can escape electoral catastrophe. The latest YouGov poll for The Times puts the party at just 20 per cent. This dire level of national support is underlined by new polling that we report today.
Whereas Rishi Sunak maintains the government will benefit from better economic news in months ahead, voters are unlikely to return to the Conservatives even with an economic recovery. Almost half of voters say they will still vote Labour in that event, as against 26 per cent who would support the Conservatives.
Labour has little incentive to be explicit about its plans. Yet it would benefit informed debate if the party were to spell out its plans for economy in specifics and costings rather than broad principles. As it stands, even those declaratory aims suggest Labour relies too much on regulation and controls to govern the economy rather than trust to the productive power of competitive markets.
Sir Keir Starmer has proffered few hostages to fortune. The big exception in economic policy is a policy he has already resiled from: a commitment to spend £28 billion a year till 2030 on sustainable energy projects. Labour’s retreat is sensible. While mitigating climate change is vital, a spending commitment that bore scant relation to the country’s manufacturing capacity for domestic heat pumps and other equipment was a guarantee of wasteful investment with little economic return.
But while the reversal is sound, the reason cited for it is tangential. The party says the state of the public finances puts a constraint on its plans, and this is true. The wider problem with its approach, however, is a reliance on the state to direct investment to productive uses. There is no evidence that bureaucrats have greater insight into this question than financial markets.
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That this is Labour’s general approach is confirmed by the Mais lecture delivered by Rachel Reeves, the shadow chancellor, last month. She explicitly distanced the party from the approach set out by the late Lord Lawson of Blaby, Conservative chancellor in the 1980s, that the central role of economic policy is to control inflation, whereas growth should be promoted by supply-side policy such as promoting flexible labour markets.
Labour is at liberty to reject the Lawson legacy but should recall that the governments of Tony Blair and Gordon Brown from 1997 to 2010 did not. That is because the approach makes sense.
Governments lack the ability to fine-tune aggregate demand by the blunt instruments of monetary and fiscal policy. By contrast, Ms Reeves propounded the non sequitur that the western economies have suffered a supply shock, boosting inflation, to argue for more interventionist policies. Ms Reeves’s critique is misconceived. Governments cannot predict supply shocks like the rise in energy prices due to Russia’s invasion of Ukraine, and the inflationary effects are generally short-lived. These are not an argument for protectionism in energy or industrial policy, or for state intervention in support of strategic industries.
Perhaps most worryingly, Labour champions the cause of regulation above that of the consumer. If the party goes ahead with banning zero-hours contracts, for example, then the supply of services in sectors such as hospitality will be less flexible and more expensive. Labour’s plan for boosting growth speaks much of industrial policy but not of competition policy.
Labour may cavil at this interpretation of its plans, but in truth voters as well as commentators have little to go on except statements of such generality that the omissions are at least as striking as the stated themes. The presumption must be that Sir Keir and his colleagues have not really thought much about trade-offs, costs and choices in economic policy. They should.
