FTI Consulting UK Public Affairs Snapshot: One year on from Sunak’s five pledges: Growing the economy

Sunak’s pledge to grow the economy has come into sharp focus in recent months. Having met his first goal of halving inflation, November’s Autumn Statement represented the inflection point when his primary objective became economic growth. With the Leader of the Opposition, Keir Starmer, also declaring that “growth must become Labour’s obsession”, this is shaping up to be the key political battleground.

But given that 69 of the past 75 years have seen year-on-year GDP increases, sceptics might question the ambition of a Prime Minister who felt the need to spell out a commitment that might otherwise be taken for granted. Despite the pledge being made amid a series of dismal economic forecasts, the reality remains that the electorate will judge success on how material and sustained that growth feels.

In late 2022, as inflation soared above 10% and interest rates were raised, data showed the economy contracting. Indeed, the Office for Budget Responsibility predicted that Britain was on the precipice of a year-long recession.

With Liz Truss’ attempts to generate growth merely creating turbulence, Sunak needed to project stability and competence. But he also banked on some economic light at the end of the tunnel. Phrased as simply as possible, his commitment only to real-terms growth provided maximum leeway on delivery and the easiest path to success.

So how has Britain’s economy fared in the year since? It has certainly outperformed the OBR’s alarming predictions. The release of full-year GDP data in February will likely confirm that a recession was avoided in 2023. As November’s figures reported 0.3% growth, with the Bank of England predicting a “broadly flat” trajectory to continue, conditions have allowed Sunak to claim success in navigating the economy through difficult waters, with better results ahead.

However, with the IMF predicting that Britain will have the slowest-growing G7 economy in 2024, questions remain over how convinced the jury is likely to be.

Labour will point out that recent growth has been anaemic at best. They will also remind voters that Sunak’s pledge was accompanied by a commitment to create better-paid jobs, and while pay growth may be above inflation for the first time in two years, forecasters predict that unemployment will continue to rise and household disposable income per person will continue to fall throughout 2024.

Without any obvious silver bullets to reverse these trends before the election, Sunak’s campaign is likely to emphasise the extent to which the Government has created the necessary conditions for growth, and that more is on the way.

The package of measures announced in the Autumn Statement neatly align with this: business tax cuts to boost investment, a minimum wage increase, and more financial incentives for Investment Zones to ensure that growth is distributed across the regions. In short, a suite of policies to convey that, under Sunak’s plan, the economy is back on track.

Yet Downing Street will no doubt be concerned that none of this is being reflected in the opinion polls, with Labour’s double-digit lead remaining stubbornly consistent. Sunak’s election chief, Isaac Levido, advised him that it would take at least a year to start seeing shifts in the polls. However, that advice came over a year ago.

Of course, Levido did not factor in that the Conservatives would inflict incessant infighting, scandals, and resignations on themselves. But No 10’s problem is not just with the Conservative brand. Both Sunak and his Chancellor, Jeremy Hunt, personally trail Starmer and his Shadow Chancellor, Rachel Reeves, on who would make the better Prime Minister and Chancellor.

However, the election remains distant enough for tides to change. The Labour frontbench knows it needs to do more than call out past poor performance if its punches are to continue to land. For its part, the Conservative Party continues to point out that the details behind Starmer’s growth plan remain hazy and that many of the principles undermining it match Sunak’s. Meanwhile, attacks on Labour’s now-downplayed £28 billion green pledge have exposed vulnerabilities that the Conservatives will only continue to exploit.

Despite this week’s YouGov poll showing that Sunak’s party would lose 196 seats if the election were held today, voters are likely to demand clearer economic proposals from Starmer come election day. Conservative strategists are already playing on fears of the unknown, with Sunak urging voters to stick with his “long-term plan” instead of “going back to square one” with Labour.

For now, the Prime Minister will be relieved to have entered the New Year with a recession seemingly averted and his second pledge on track to be delivered. Yet with industrial action rumbling on, a sluggish economy showing few signs of shifting into gear, and a geopolitical backdrop threatening stability on all fronts, Sunak faces an uphill battle to convince voters that the Conservatives are the answer to Britain’s economic stagnation.

Next week, we will review the Prime Minister’s third pledge: Reducing national debt. To sign up to FTI Consuting’s mailing list to get our snapshots delivered straight to your inbox, please click the button below.