Labour need to name the problem
As Trump's war threatens the economy, the government need to get their position in early.
A great deal of political airtime this week has been consumed by a row over banknotes. It is an unedifying spectacle, and a revealing one — a political class focused on what is printed on money rather than what is happening to its value. That this has coincided with events that could already be determining the economic conditions of the next election is not just unfortunate. It is a fairly precise illustration of the problem.
The golden rule of electoral politics remains stubbornly intact: governments don’t lose over culture; they lose over economics. Or at least the way economics feels. In 2024, ruling parties fell across the democratic world, unseated not by ideology but by inflation. In Britain, the Tory collapse was rooted in a long period of low growth, spiking prices and high interest rates. Voters didn’t need a detailed understanding of gilt markets to know something was wrong. They felt it in their pockets.
The Tory vote held up longest among home-owning pensioners, arguably the most insulated from these pressures. That is not a coincidence. In 2015, the Conservatives won largely because their core supporters felt better off and hadn’t been touched by austerity’s sharper edges. The pattern is consistent and merciless: when people feel poorer, governments pay.
The current government now face a frightening predicament. Their own faults and failures are now at real risk of getting compounded by a global economic catastrophe beyond their influence. So much now hinges on the reopening of the Straits of Hormuz. Without it, there will likely be a massive oil shock with consequential inflation, interest rate rises, and a general deterioration in economic standards. That looks like a hard thing for any government to survive, especially one which is already struggling.
Labour have little control over what happens here. For Starmer, Reeves, or whoever succeeds them, the decision-making is out of their hands. The course of the war is dependent on America and Iran. The best the UK can do is hope to lobby for a quick end to hostilities and cooperate with partners to mitigate the economic effects. Yet neither will achieve much if both Trump and the Ayatollah commit to maximum damage.
