As much of the country trudged to the polls in Thursday’s local elections, the Bank of England released its latest forecast for the British economy. It made grim reading. Even if it’s a tad too gloomy — and I doubt it is — the prospect of an economy in decline is a far bigger danger to the Johnson Government’s hopes of re-election than the local election results.
Not that the elections offered much comfort to the Tories. London was a bloodbath, with the loss of their three flagship borough councils to Labour — Wandsworth (Margaret Thatcher’s favourite council), Barnet and Westminster, which has been Tory since it was created in 1964, when the Beatles and Rolling Stones dominated what was then called the hit parade.
But Labour struggled to make significant gains elsewhere in England. The Liberal Democrats were a bigger threat to the Tories in their prosperous Blue Wall southern shires. They even managed to end Tory rule in West Oxfordshire, which includes David Cameron‘s old true-blue seat of Witney, where he had a majority of over 25,000.
Crucially, Labour failed to make even a start on ousting the Tories from the Red Wall, traditional Labour areas in the North and Midlands that went Tory in the 2019 general election.
As much of the country trudged to the polls in Thursday’s local elections, the Bank of England released its latest forecast for the British economy. It made grim reading. Even if it’s a tad too gloomy — and I doubt it is — the prospect of an economy in decline is a far bigger danger to the Johnson Government’s hopes of re-election than the local election results
Cumberland was a rare northern Labour gain. In other areas of the North, the Labour retreat continued.
The real significance of Thursday’s voting is not what it portends for the next general election. Rather, it represents a further stage in the dramatic redrawing of England’s electoral tectonic plates in the 21st century, in which voting habits that have been around for generations are being upended and areas hitherto dominated by a particular party since time immemorial are suddenly changing hands.
This process had been slowly under way for some time. But it was given rocket boosters by the 2019 election, as getting Brexit done became more of a defining issue for many than traditional Left-Right divisions.
This left Labour unassailable — even in a bad year (and 2019 was a very bad year for Labour) — in major metropolitan areas, but losing many of its former fiefdoms in the smaller towns and cities of the North and Midlands to the Tories, who had not had a prayer in these places for a generation or more.
Thursday continued this seismic trend, confirming that 2019 was no fluke result. Labour consolidated its already formidable grip on London, the only major English metropolitan area up for grabs.
It took Southampton from the Tories (you can’t get more southern than that), while the Tory share of the vote fell markedly in its old southern heartlands — the leafy shires surrounding the capital. But the Tory vote held up surprisingly well in Red Wall seats, where ‘Partygate’ perhaps resonated less than the Tories’ tougher ‘Rwanda solution’ to illegal immigration; they even made some gains in bellwether places such as Nuneaton and Hartlepool.
New reality: The old dividing lines no longer apply for Starmer and Johnson in the topsy-turvy 21st century. England’s new electoral map is very different from the one that dominated last century
Meanwhile, Labour lost control in once rock-solid northern Labour towns such as Hull and Oldham.
England’s new electoral map is very different from the one that dominated last century.
Labour is now overwhelmingly a metropolitan party — and the party of university-educated metropolitan elites. The Tories are becoming the party of the non-metropolitan urban and rural areas outside the South, as they are forced to retreat from the southern shires. The Labour vote is increasingly middle, even upper-middle class, the Tory vote increasingly working and lower-middle class.
This is a dramatic change in British politics and the leadership of both parties is struggling to grapple with its implications.
It makes British politics fluid and unpredictable — which means, in truth, that Thursday’s results tell us very little about the next general election. The overall result is too messy to inform any confident projections.
Yes, voters have fallen out of love with beleaguered Boris Johnson — of that there is no doubt. But they have not fallen in love with Keir Starmer, otherwise the Lib Dems and Greens would not have made so many gains.
Even the victorious Labour leader in Barnet admitted his party’s gains were not so much about enthusiasm for Labour but disillusion with the Tories.
Yes, voters have fallen out of love with beleaguered Boris Johnson — of that there is no doubt. But they have not fallen in love with Keir Starmer, otherwise the Lib Dems and Greens would not have made so many gains
It won’t help that Durham Police have finally decided to investigate whether Starmer broke lockdown rules when he and Labour activists had beer and takeaway curry late one night during the run-up to the Hartlepool by-election in spring last year.
The Labour leader has deployed Johnsonian levels of obfuscation and dissembling when grilled about ‘Beergate’, and the party’s press office even went so far as to deny that Labour deputy leader Angela Rayner was also present.
Tory councillors admit Johnson’s Partygate had cut through on the doorstep, even among Tory voters. But Starmer will now have to cease firing any more salvoes about it, even if the Prime Minister is slapped with more fixed penalty notices, until Durham Police finish their investigation of him. Johnson is one lucky prime minister.
On the basis of Thursday’s results, Labour would not win an overall majority in a general election. Indeed, they wouldn’t necessarily even be the largest party.
The Tories will be relieved that the Red Wall, on which they increasingly depend, is largely intact and think they can more easily see off the Lib Dems in the South in a general election, when choosing a government is more important than a protest vote.
In some ways, the local election results are already history. The looming recession is not — that is the dismal future which beckons.
The Bank of England tap-danced round the ‘r’ word — recession — in its latest forecast. But if you read between the lines, it’s pretty clear it fears that’s where we are heading.
Bank Governor Andrew Bailey talks of a ‘sharp slowdown in activity’, which I take to be code for recession. The Bank projects economic stagnation for as far as the eye can see, up to and beyond the next election.
It expects the economy to grind to a halt before the year is out, then decline a bit in 2023 and grow a bit in 2024 (when the current Parliament’s five years will be up).
The combined effect is more than two years of zero growth. There is no year between now and the end of 2025 in which the Bank projects growth of even 1 per cent.
The economy is on a knife-edge and it would take only one more shock — say a further rise in energy prices as a result of an oil and gas embargo on Russia — to tilt us into recession. For many it will feel like recession anyway, even if economists say that technically it’s just very slow growth.
Yet despite an economy bumping along the bottom, the Bank expects inflation, already 7 per cent, to continue to rise, peaking at over 10 per cent before the year is out — five times above the inflation level the Bank is tasked to deliver (don’t worry — Bailey still trousers his £575,000 salary despite being out by a factor of five). Ladies and gentlemen, I give you stagflation.
Bank Governor Andrew Bailey (above) talks of a ‘sharp slowdown in activity’, which I take to be code for recession. The Bank projects economic stagnation for as far as the eye can see, up to and beyond the next election
Even though wages are expected to rise on average by over 5 per cent this year, that still won’t be enough to stop the biggest fall in take-home pay in real terms since records began. Cue the mother of all cost-of-living crises.
Of course, much of the inflation is beyond the Government’s control. The war in Ukraine has pushed up energy prices, which were rising fast even before Russia invaded.
Supply chain bottlenecks, which should have been resolved by now, have been prolonged by new lockdowns in China, where Shanghai, the largest port in the world, and other urban areas accounting for around 40 per cent of Chinese GDP are effectively closed for business.
It’s estimated that these global factors account for 80 per cent of current inflation. In these pages some time ago, I wrote that in such circumstances the best you can hope of government is that it doesn’t make things worse.
Sadly, the Government has done just that with last month’s rise in National Insurance contributions and freezing of income tax bands — effectively a rise in income tax — which squeeze take-home pay even further.
The Prime Minister, who has no experience of fighting inflation, needs to realise two immutable political facts. One, surging inflation is invariably devastating for incumbents. Two, central banks rarely tame inflation of the current magnitude without pitching economies into recession.
So the Government needs to act before things get worse. It is now accepted by senior Tories that Chancellor Rishi Sunak did not do nearly enough in his spring Budget to alleviate the squeeze on living standards.
Energy bills are set to rise by a further 40 per cent in October, on top of the 54 per cent rise last month, taking the average household fuel bill to £2,800. This will be a crisis for millions of families.
Voices grow louder for Sunak to act directly to lower energy bills by scrapping the green levies and cutting VAT to zero, at least for fuel bills below a certain amount. Together that would save households several hundred pounds. But it is not enough.
Labour has been pushing for a windfall profits tax on energy companies, using the proceeds to cut energy bills. Windfall taxes are generally a bad idea and the Government has claimed it would deter the energy giants from much-needed investment.
But the energy companies themselves have shot that particular fox. Shell plans to invest £25 billion in the UK over the next ten years. Its boss, Ben van Beurden, says his company has a ‘very strong commitment to investing in the UK’. When asked if a windfall tax would change that, he replied: ‘I suppose not’.
You can see why. Shell made more than £7.3 billion in profits in the first three months of this year alone. It is paying out more than £4 billion in dividends to shareholders and using more than £6.5 billion to buy back its own shares. When big companies buy their own shares, it usually means they have more money than they know what to do with. It can afford a windfall tax.
BP also has a multibillion-pound investment programme planned for Britain. Its boss, Bernard Looney, has also indicated that a windfall tax would not cause it to think again.
Labour has not done well enough to reignite a Tory campaign to get rid of Johnson. Some local Tory bigwigs are understandably bitter about Thursday and blame Johnson for their losses. But so far, no national figures have spoken out against him.
He is helped hugely by the lack of a clear alternative. Even Tory MPs with no love for Johnson are pretty scathing about his potential rivals.
One said any leadership contest would be as ridiculous as the cartoon Wacky Races. Jeremy Hunt has been described as ‘Theresa May without the charisma’. Of Liz Truss, it’s being said: ‘If she’s the answer, what was the question?’ And Sunak is widely regarded as a ‘busted flush’.
Fair enough. But unless the Government gets on top of the cost-of-living crisis pronto and takes action to see off an imminent recession, it won’t really matter who leads it — because it will be heading for inevitable defeat whoever is in 10 Downing Street.
