It has been a difficult start to life as an MP for the 2024 intake. The Conservatives are adjusting to their much-diminished number and a new leader. Labour MPs, elected as part of a ‘mission-driven’ political project, have found that governing is a much tougher job than being in opposition. Defending the decision to remove Winter Fuel Payments from pensioners; a Budget fallout with significant push-back from business and farmers; and the ethical dilemma of the vote on the Assisted Dying Bill are all issues that none of them would have expected navigating when they entered Parliament last July.
Over the coming months, with a volatile geopolitical environment and an uncertain domestic economic one, Number 10 will hope to navigate their Spending Review and deliver meaningfully on their missions. The ‘Change’ platform on which they were elected drives these missions, and Ministers believe that future national and electoral success relies on whether the country feels the impact of growth in their day-to-day finances and across public services. This helps to explain the evolution from the pre-election messaging of pursuing the ‘fastest growth in the G7’ to now ‘raising living standards in every part of the UK’.
An important moment for the Government will be the OBR’s Spring forecast currently scheduled for March 26th – which may prove to be a major inflection point. The Government is clear that its economic policies will only be considered successful when they are felt by the public. That is a significant challenge when inflation remains high, energy prices are rising, and high interest rates mean that more than four million will pay higher mortgage rates over the next three years.
A leak last week suggested that the OBR had downgraded growth forecasts and that Rachel Reeves’s £9bn of fiscal headroom is gone. Reeve’s faces further difficult decisions around whether to cut spending on public services or welfare to balance the budget, having committed to not raising taxes for the time being.
This downgrade is not unexpected – the cost of UK government debt has risen to its highest levels since 1998 and further difficult developments in the gilt markets will have likely impacted the outlook and will continue to affect the first drafts of the highly anticipated Spending Review in June.
The OBR forecasts may change as new economic data is published over the next five weeks – further updates are being provided to the Chancellor at the start of next month. Reeves can also use policies to boost growth. Otherwise, she will have until March 26 to find the money to meet the budget shortfall.
The Government is determined to push through what they hope will be short term political turbulence. They hope to reap the economic and political rewards of taking early, difficult decisions in the service of long-term stability, fiscal responsibility and policy certainty.
The coming months will mark a series of ‘first’ milestones for the Government, and impressions will count. The first anniversary of the election of Labour’s victory may feel like a critical point and will come just after the first set of local elections since returning to power – prompting a period of reflection.
Labour strategists will hope that as Ministers find their feet and imprint their priorities on their departments, and receive clarity from the Spending Review, there will be a springboard effect towards implementation and delivery. Whether that hope becomes a reality remains to be seen.
