To say that Sir Keir Starmer has made Rikki Fulton’s Reverend I.M. Jolly character look upbeat would not be too much of a stretch.

And at least the Rev. Jolly delivered some laughs.

The downbeat demeanour when it has come to the economy and public finances from Sir Keir and his Cabinet colleagues, including Chancellor Rachel Reeves and Secretary of State for Scotland Ian Murray, is a serious business.

It is of course impossible to divine the precise effect of miserable mood music from political leaders on the investment and spending decisions of businesses and consumers.

However, the attitude of Sir Keir and his colleagues, and the Prime Minister’s warnings about “tough” choices are hardly going to help. They would seem likely to damage confidence, and it is hard to conceive that what we have heard so far from the new Labour Government will have put much of a spring in anyone’s step.

It has certainly not gone down well with some of the electorate, with polls showing Sir Keir’s approval ratings have plummeted in the months since his July 4 General Election victory.

Sir Keir continues to strike what seems to be exactly the same tone as that chosen by erstwhile Conservative prime minister and chancellor David Cameron and George Osborne when they came to power in 2010.

The Conservatives back then blamed the previous Labour government. This entirely missed the point that other major developed countries, and many other nations of course, were hit by the global financial crisis. The key is in the word “global”, and when the crisis took a lurch for the worse in autumn 2008 the then Labour prime minister and chancellor Gordon Brown and Alistair Darling did a rather good job of staving off collapse of the UK financial system.

Sir Keir and his colleagues certainly have some grounds for pointing the finger at the Conservatives for their poor stewardship in the years since 2010.

The Tories have presided over a miserable economic performance, as a result of huge mistakes such as their failed austerity programme and hard Brexit, and this has affected the public finances enormously. And the spooking of financial markets in autumn 2022 during Liz Truss’s brief spell as prime minister was not a good thing either.

It is important, when looking at what has occurred, not just to focus on the autumn 2022 shambles but to see the things that have caused the problems over a much longer period.

Labour refuses these days even to acknowledge the huge damage being caused to the economy by the Conservatives’ hard Brexit, stemming from the ending of free movement of people between the UK and the European Economic Area and loss of frictionless trade with the country’s biggest trading partner. However, that does not make these colossal losses go away or render them any less real.


Read more

 


 

The new UK Government also looks to be telling a tale of austerity. It is certainly sticking with the Conservatives’ fiscal constraints, limiting greatly its capacity to deliver major investment that could stimulate growth and boost tax revenues.

Returning to the mood music, it was interesting to see the University of Strathclyde’s highly regarded Fraser of Allander Institute highlight the messaging by Labour, and the potential impact of this, in its latest economic commentary published last week.

Fraser of Allander director Professor Mairi Spowage said: “The new UK Government has come into place in July, and the new Chancellor, Rachel Reeves, has set out her view of their fiscal inheritance and the difficult decisions which may need to be made in order, as they would see it, to restore economic stability.

“The rhetoric around this has the potential to dent business and consumer confidence and contribute to the softening economic performance over the summer. However, it is always difficult to definitively say that - the economy is a dynamic organism rather than a predictable mechanism. Many businesses may well be waiting to see what is in the Budget on 30th October to have the confidence to grow and invest.”

Fraser of Allander’s commentary notes that “recent UK-wide data from market research firm GfK reveals a decline in consumer confidence during July and August, with weakening perceptions of general economic conditions and the likelihood of consumers making big purchases”.

Douglas Farish, head of tax for Scotland for accountancy firm and Fraser of Allander commentary sponsor Deloitte, for his part highlighted the effect of the new Government’s declarations on consumer confidence.

And he contrasted this with an upbeat view from companies’ chief financial officers in the immediate wake of the election.

Mr Farish said: “Captured immediately after the General Election in July, Deloitte’s latest CFO survey showed signs of the UK’s corporate sector gearing up for growth, with a sharp rise in CFO confidence complemented by a drop in external risk perception. Uncertainty dissipated, revenue prospects brightening in the face of a more predictable business environment.

“This was juxtaposed, however, by the new UK Government underlining difficult economic circumstances, highlighting a £22bn ‘black hole’ exists in the public finances, with both the new Prime Minister and Chancellor warning of “tough” decisions to come in the October 30 Budget. Perhaps unsurprisingly, recent indicators show consumer confidence has cooled as the public braces for impact.”

It certainly does seem that the mood of the electorate is somewhat miserable right now.

And it is difficult to escape the impression that Labour has made matters worse on this front.

If Sir Keir and Ms Reeves produce the type of Budget of which they have been warning, you would imagine there is a good chance the mood of businesses and consumers will get worse still.

The UK economy has been suffering a malaise for so long now, so it is little surprise that businesses and households want to see some signs of brighter times ahead.


Read more

 


 

Sadly, for now, it is difficult to see better times in the short term, not because it is impossible for the new Labour Government to lead us towards them but because it has ruled out embarking on a brighter path through the choices it has made.

The two big simple realities, putting aside the talk and mood music for a moment, are that Labour has tied itself up with the Conservatives’ fiscal constraints and is sticking with the damaging hard Brexit.

In addition to these blunders, its tone is truly confidence-sapping.

A more upbeat message might not shift the dial dramatically if it is not accompanied by some more adept policymaking.

However, it could hardly do any harm.