
3 minute read
PARTY CONFERENCE CONFLICT
JAMES EADES AND STEPHEN DONE | INVESTMENT RESEARCH
Political party conference season kicked off in late September with the Conservatives hoping to quell member fears over the controversial mini-budget of then-Chancellor Kwasi Kwarteng and Labour hoping to capitalise on voter discontent with a clear plan for the UK’s future around the key battleground for the next election, the economy.
Following widespread criticism of the mini-budget, the Conservative footing looks to be shaky, with Liz Truss’ personal approval rating reaching the lowest ever recorded in an Observer Opinium poll. Then-Chancellor Kwasi Kwarteng’s speech should have been used as a platform for settling nerves around the recent mini-budget and reassuring members of the government’s
commitment to fiscal responsibility. Doubling down on the beliefs of low tax, high growth and fiscal discipline failed to alleviate market concerns, however. Leading UK research institute the Institute for Fiscal Studies (IFS) noted that the Truss-Kwarteng partnership had two important points right: growth matters, to the point where past governments should have been far more proactive in securing it; and redistribution shouldn’t be the benchmark against which policy is judged. While accurate on the problems, the IFS noted that the solutions failed to stack-up.
With Conservative Party ratings on the slide and public perception turning negative, Keir Starmer’s Labour party look to be in their best position for years. Recent polling from YouGov shows a marked uptick in the approval rating of the Labour leader, with 43% of respondents approving of his performance as of early October, up from 27% at the end of August. With promises from the Labour leader to fight the next election on economic growth, Shadow Chancellor Rachel Reeves’ outlining of the Green Prosperity Plan was a pivotal moment. Key to the plan, the creation of an £8bn National Wealth Fund earmarked for green investment, with the hope that government capital will attract further private investment into the UK’s renewable infrastructure. Investments from the fund into battery factories and cleaner steel plants are expected to see wealth flow back into local communities whilst driving economic growth. Perhaps the most important economic message from the party comes in its pledge for full costings of future expenditures as it sets sights on being the party of fiscal responsibility - a stance well received in the face of large unfunded spending promises from the Conservatives which sent shockwaves through the financial system. Well received by many, from The British Chamber of Commerce through to industry names such as John Allan, Chairman of Tesco, Labour’s positioning looks to be strengthening as we approach the 2025 general election.
Both parties are clearly focused on growth of the economy, expecting it to be the key battleground in three years’ time. Damage to the Conservatives has been done by the “growth, growth and growth” outlook of Truss, compared to the seemingly more responsible Labour plans of a National Wealth Fund, which still requires clarification around its finer details. It remains clear that financial markets react badly to the notion of large increases in debt loads on national balance sheets, making fiscal responsibility the key factor for proposed economic policies in the run up to 2025. It’s not just financial markets experiencing large swings: the Election Polling website appears to show a large shift in Labour’s favour at the next general election, while Ipsos polling indicates Labour is being viewed as the best party for managing the economy for the first time since the financial crisis. While interesting, polling data tends to be skewed in times of economic distress as respondents assign blame to the party currently in power. The extent to which blame against the Conservatives is warranted remains open debate, but there is clearly a mountain to climb for the party in its bid for re-election.
