If most people, when it comes down to it, are relatively apathetic about politics, almost everyone takes notice of economics. Not inverted yield curves or endogenous growth theory, but the pound in their pocket, the mortgage, salary and pension.
That’s a rule that history tells us no politician can afford to ignore. And it’s one that Liz Truss will doubtless be keenly aware of, after a week in which the markets all but buried her chancellor’s mini-budget statement, sterling went into free-fall and an attempt to spark growth by cutting taxes for the rich had all the markings of a policy suicide-bomb.
“The risk the government faces,” says Sir John Curtice, professor of politics at the University of Strathclyde and an expert in electoral behaviour, “is that what happened last week becomes seared on the voters’ minds in the same way that Black Wednesday did in 1992, and the finance and banking crisis of 2007-08. Those events, along with the 1976 IMF crisis, and even the 1940s run on the pound, all proved very, very difficult for the incumbent government to survive.”
Polls have shown Labour taking a commanding lead, with YouGov giving it a 33-point advantage. “It’s a hinge moment,” says one senior Labour insider. “Not only is Truss blowing her chance, but we’ve finally managed to introduce Keir Starmer’s Labour to the country [following his generally well-received speech at the party conference]. We haven’t seen movements in polls like this for years.”
But it’s whether that lead can be maintained and carried into marginal or swing seats that is the critical question. Nowhere is more crucial in that calculation than the Midlands, which is full of constituencies that either hang in the balance or are microcosms of national trends.
One notable bellwether town in the West Midlands is the cathedral city of Worcester, a constituency that tends to vote for the party that forms the government. It’s also the home of “Worcester woman”, a demographic invention that was supposed to describe an apolitical mother of two children who is a characteristic swing voter.
On the streets of Worcester itself, local women don’t seem ready to change their minds. If they are Labour voters, the past week has confirmed all their worst fears. And if they are Conservative, they may look shocked and a little anxious, but most are reluctant to translate those feelings into swapping political allegiance just yet.
“I think I have lost confidence in the government, but whether it will ever make me change my voting decision I don’t know,” says Charlotte Adams, who wanted Rishi Sunak to win the Tory leadership contest.
She wonders if the markets have been too quick to judge, and if chancellor Kwasi Kwarteng’s tax-cutting plans for the wealthy may yet lead to economic growth. The real culprit for her is Vladimir Putin, whose invasion of Ukraine she sees as the root cause for the cost of living crisis.
Though several people mention Putin’s name, most don’t take a geopolitical perspective on Britain’s current economic plight. They tend to see things in more personal and small-scale terms.
For example, Claire Colgate notes that she’s taken to shopping at Lidl, rather than Marks & Spencer and Waitrose. She has two jobs, one selling equestrian clothing, which she describes as “midrange retail”, and the other working for an art dealer, who caters both to the midrange and the high-end market, with some sculptures selling for £135,000.
What she’s noticed is that the midrange business is falling away, but the high end is flourishing. At a recent art event, where she would normally sell 200 to 300 low-price items, she sold 14. But all the expensive sculptures were bought.
That doesn’t sound like an illustration of the much-trumpeted levelling up. But her husband, Perry Colgate, says that he works for a wealthy man selling horse supplements and he believes the tax cut will help his boss to expand his business, which will be good for the employees.
“There’s always two sides to every story,” he says. “Yes, the rich get richer, but if the right people make the money it keeps people in employment.”
The Shakespeare-loving Boris Johnson haunts proceedings like Banquo’s ghost, with large numbers of people I spoke to saying they were sad he had gone. By contrast, few express strong positive feelings about Truss, despite the (rather misleading) cap she has announced on energy bills.
One exception is Leanne Stratford, a teacher who rooted for Truss over Sunak. She estimates that her mortgage payments could double, but doesn’t think that will stop her voting Tory again. “She has just come in,” she says of Truss. “I know she’s gone into hiding, but hopefully when she comes back out she will do something about it.”
Yet Stratford doesn’t want Truss to backtrack on the mini-budget commitments, because she supports the tax-cutting and lifting restrictions on bonuses.
Her partner owns a bar, she explains, and the lower tax will help him to employ more people. “I think she should continue at the moment and maybe reassess in a couple of months,” she says.
If a week is a long time in politics, two months is an eternity, particularly when the financial markets smell blood. Most economists, and even many Tory MPs, believe that Truss and Kwarteng will have to back down because their economic vision is flawed. Unless you can get money into people’s pockets and the confidence into their hearts that they won’t need to save it for mortgages and other spiralling costs, then enriching the already rich is unlikely to result in growth-stimulating consumer spending.
For Mike Parkin, who works in local government and is avowedly not a Conservative voter, Truss and Kwarteng lack basic competence. The service sector, he points out, can’t gain lift-off while prices are going up and wages are stagnating.
“I used to get my breakfast every Saturday down the Boston Tea Party for a tenner,” he says. “Now it’s £15. So restaurants and bars may be able to employ more people but people won’t be able to afford to go out.”
Combine that with increased government borrowing, the run on government bonds, and the plunging pound, and it’s an economic tunnel with no obvious light-filled end in sight. Tim Bale, professor of politics at Queen Mary University of London, and an authority on Conservative party politics, believes Truss’s best option is to drop the bankers’ bonuses, reinstate the rise in corporation tax and cancel the lowering of the top rate of income tax. “Then,” he says, “they might get away with it.”
But it will be a major admission of defeat by Truss, who was warned, not least by her rival Sunak, that tax cuts wouldn’t work. “Yes,” says Bale, “but a U-turn is survivable. Driving the car off the cliff isn’t.”
Truss puts the blame for her predicament on two parties – the markets (that she’s relying on for investment) for overreacting, and Putin for the inflationary war. There is, though, another factor that is rarely mentioned: Brexit.
The past six years of British politics have been dominated by the fallout, and it’s evident that leaving the EU’s large and lucrative single market has affected growth, which in turn has encouraged Truss (who was, of course, for economic reasons, against leaving the EU) to make this fateful gamble.
However, Starmer has made clear that Brexit is not really up for discussion. “Labour can’t draw the obvious conclusions,” says Bale, “because they still regard Brexit as the third rail they can’t touch.”
Nuneaton voted 2-1 in favour of Brexit, but it has also swung between Tory and Labour in step with changes of government. When I visited before the referendum, immigration was one of the key issues firing antipathy towards the EU.
Immigration from within the EU has subsequently declined, while immigration from without has shot up, and Truss plans to increase it further. Yet no one voiced any concern on the subject last week, other than about people arriving on boats from France.
“The irony of Brexit,” says Bale, “is that it hasn’t reduced immigration that much but it has certainly reduced people’s concern about it. It’s even dropped outside the top 10 issues people are worrying about.”
All Brexit voters I speak to have no regrets about their votes, although none can say what benefits leaving the EU has brought. Several, like Sean McNicol, maintain that Johnson had been “on the right track”, and it was only Covid that thwarted him. If anything, support for Johnson is even more pronounced in Nuneaton than in Worcester.
Lesley Looker says she used to be a Labour voter but changed to Conservative in reaction to Jeremy Corbyn. At last, the elusive floating voter. As she thinks Truss has been reckless, will she change her vote?
“I wouldn’t change to Starmer,” she says. “I worked for the police for many years and he was a police commissioner.”
He was director of public prosecutions, I correct her.
“Whatever he was, he was no good at it,” she says.
The high-up Labour insider says Starmer and the people around him are guarding against complacency. “I don’t think there is anybody in the senior political team who is thinking: ‘Oh great, it’s in the bag’.”
Judging from Worcester and Nuneaton, it isn’t yet. But if Truss has further weeks like the last one, it soon will be.