The cost of living and the financing of public services such as healthcare have worried voters in the United Kingdom and galvanized the Labour opposition, which is expected to return to power in the United Kingdom after 14 years On the eve of the general election in the United Kingdom conducted this Thursday (04/07), polls are pointing to a clear result: the defeat of the Conservative Party, which is currently in power with Prime Minister Rishi Sunak. After 14 years in opposition, the Labour Party led by Keir Starmer looks set to return to government with a large majority.
Opinion polls show that disappointment with the state of the economy is one of the main reasons driving the change. According to US think tank Pew Research Center, just 22% of voters think the UK economy is in good shape.
Even diehard Conservative Party supporters agree. As recently as 2017, about 75% of the party’s supporters had a positive opinion of the economy. Today, that number is 27%.
“Things are starting to get better”
This is not good news for a party that has had a decade and a half to implement its economic vision in the country. However, the government is banking on some positive economic data in recent months, which is why voters may still trust the Conservatives to manage the world’s sixth-largest economy.
“After a difficult two years for the country, there is no doubt that things are starting to recover,” Prime Minister Sunak said in May. “Confidence is returning to the economy and the country.”
The UK economy emerged from recession with better-than-expected growth of 0.7% in the first quarter of 2024. Inflation also fell toward the Bank of England’s 2% target for the first time in three years, reinforcing expectations that the country’s central bank will cut interest rates later in the British summer.
Oxford Economics analyst Andrew Goodwin says there are early signs of economic recovery. “In the context of the last two years, the economy is doing quite well,” he says. “There is continued growth, although not at the pace you usually see in the early stages of a recovery.”
Voter concerns
However, he says the details of economic policies have not been a major issue of discussion during the election campaign. “Economic policies do not have much appeal among voters and parties have mainly focused on other issues,” he says. “Yet the pressure of the cost of living and the underfunding of public services are two major factors behind voters’ desire for change.”
Analyst Creon Butler, director of global economics and finance at London think tank Chatham House, assesses that the state of the economy is motivating voters, particularly the issue of inflation. He also says that funding of public services is a very important issue for voters.
“They can see the consequences of the economy’s poor performance across a whole range of other services, from the National Health Service (NHS) and the police to local authorities, spending on roads and so on.”
“In other words, what the public sees is a result of poor economic performance, that the government does not have enough money to spend on essential public services.”
A key issue for the next government will be public investment. A recent study by the Institute for Fiscal Studies, a UK-based economic research institute, predicts that public sector investment as a percentage of GDP will fall from an estimated 2.4% this year to 1.8% by 2028.
“I don’t think the public is hearing the full story from political parties that we have to make really tough choices,” Butler says. “The consequences of the economic weakness, particularly productivity growth, have not really been explained to the public to the extent necessary,” he assesses.
Goodwin agrees. “While there is debate over the shape of post-election fiscal policy, both parties are largely ignoring the dark legacy they will have to face in the next government,” he says.
Some differences over economic policy
Although there is heavy debate between the two parties over how to increase productivity and GDP growth, many commentators say there is not much difference between the economic policies of Labour and the Conservatives.
Since the disastrous and short 49-day government of conservative Liz Truss, the Labor Party has presented itself as the stable option for managing the economy.
Truss’s government fell because of her unorthodox economic policies. This destroyed the Conservatives’ image as a party of economic competence. But since fellow Conservative Jeremy Hunt took over as Britain’s finance minister, Labour has not opposed many of his economic positions.
Labor’s Rachel Reeves, who is expected to become finance minister in a Labor government, holds similar views to Hunt on taxation and fiscal rules, two crucial aspects of public spending.
Still, Butler believes a Labour government could bring fundamental economic change after 14 years of Conservative governments. “It’s important not to underestimate the fact that the overall approach is very different because the philosophy is different,” he said.
He says the Labour Party differs fundamentally from the Conservatives in three areas of economic policy: the role of the public sector, regulation, and attitude to the European Union.
It is in relations with the EU that the impact of a Labour government will probably be felt most quickly. Although Labour leader Keir Starmer has wisely avoided talking about Brexit since taking the leadership, the Conservatives have tried to portray Labour’s victory as “bad for Brexit”.
“Brexit will be threatened by the Labour Party,” Sunak said recently.
Butler says that Labour has less “baggage” than the Conservatives with regard to the EU and that although they would not necessarily want to reopen negotiations, for example, to rejoin the customs union, they would be interested in developing a more amicable and productive relationship between the EU and the UK than in recent years.
However, he stresses that no matter who wins the election, the long-term impact of leaving the EU will be huge. Several studies have shown that UK GDP today is 2% to 3% lower than it would have been had there been no Brexit.
