In the News

Interest rates: Sunak's Black Wednesday?

Mike McCartney

23rd June 2023

It's the economy, stupid (again!)

The modern electorate, as probably all Politics students are aware, are inclined to cast their vote according the rational choice model. The twin anchors of partisan and class alignment still heavily shape decisions by voters at the polls, but they don't decide the outcome. It is decisions by the vital swing voters that ultimately determine what the colour of the door at Number 10 will be painted.

As such, it is the 3Ps that matter: past performance, the party leader, and future policies. (We could add a fourth 'P' here for party unity). And so, as things stand, it doesn't look too good for Rishi Sunak's government.

This is highlighted by an excellent article by Larry Elliot in the Guardian: "As mortgage rates surge, the Tories are losing their reputation for economic competence." In it, he states:

"An economic crisis was quietly brewing last week while the Conservative party was tearing itself to pieces over Boris Johnson’s misleading of parliament. Fears about the tough measures that might be needed to bring down inflation sent mortgage rates surging towards 6%.

Even without the disgrace of the former prime minister, this would be a government in serious political trouble staring at electoral meltdown.

Labour can hardly believe its luck. There is still a lingering fear that the Tories might somehow defy the odds, as John Major did in 1992, but in truth the real echo of three decades ago is of a Conservative party losing its reputation for economic competence. What we are seeing is a slow-motion version of Black Wednesday, and the worse things get for Rishi Sunak they better they look for Keir Starmer."

So, when it comes to the past performance of the government, the single most important issue is the economy. It is important to highlight, however, that it is not always based on a rational and objective assessment by voters, because the economy in 1997 was actually motoring along pretty well. But the collapse of the pound in September 1992, and the dramatic hike in interest rates, gave voters the lasting impression that the Tories didn't know what they were doing. While history doesn't repeat itself, you can often detect a rhyme.

Mike McCartney

Mike is an experienced A-Level Politics teacher, author and examiner.

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