Jeremy Hunt and Rishi Sunak’s uphill task just got a bit steeper
Jeremy Hunt will be glad we’re not hosting this summer’s Olympic and Paralympic Games.
He would be at risk of an even louder shower of boos than George Osborne received back in 2012, the last time the country was in a technical recession.
That so-called ‘double dip’ recession turned out to be a statistical mirage; GDP was revised upwards, and Osborne’s chastening at the hands of London’s crowd that evening is credited with triggering not just a personal rebrand but a new political strategy which saw he and his Prime Minister David Cameron win an election three years later.
Unfortunately for today’s incumbent of No11, there isn’t three years to wait for an economic turnaround.
Now, ‘technical recessions’ are a tad arbitrary. Mrs Jones on the Clapham Omnibus does not, today, feel poorer than she did yesterday as a result of some statistical analysis of a quarter that ended more than six weeks ago.
But it certainly matters politically.
Hunt has this morning pinned the blame for today’s recession figures on higher-than-usual interest rates, a complaint which has a nugget of truth but by no means tells the full picture.
Rates will come down – probably in May, maybe in June – but they will take time to filter through to the wider economy. With an election looming, can the Tories expect anything to turn up?
Well, maybe. It’s likely that economic growth will be better in 2024 than 2023. Perhaps, too, people will feel a little better off thanks to headlines about rates coming down, as they mentally tot up their mortgage costs.
But the problem for Hunt et al is that just as rate cuts take a while to filter through, so too do rate hikes. Repossessions of homes are starting to tick up; ditto insolvencies. Both individual homeowners and businesses alike are often able to absorb the first few months of higher repayments, but that resilience has a limit – and it’s likely that 2024 will be where, for many, that snaps.
And all of that comes after the worst run of GDP-per-capita growth since 1980.
What does this mean for a coming election? By the time it’s called, it’s likely that the UK will technically be a growing economy. That will allow Sunak and Hunt – if the latter isn’t moved on ahead of a campaign, with him standing down as an MP – to barrack voters to ‘stick with the plan’.
The problem might be that just as today’s figures are arbitrary, so might next year’s ONS data feel. Whoever wins the next election will inherit a real economy feeling very shaky indeed.