Coffee House Shots
Should Labour ditch the ‘doom and gloom’ narrative?
Subscribe to the Spectator in September and get free months of website and app access absolutely free. Follow the Tory Leadership Campaign, Labor's Inaugural Budget and the US Elections with Britain's Best Informed Journalists and get your first free months free only in September. Go to www.spectator.co.uk/sale24 Hello and welcome to Coffee House Shots, the Spectator's Daily Politics Podcast. I'm Oscar Unlinson and I'm joined today by James Hill and Kate Andrews. And we have some new inflation figures. Kate, can you take us through that? So the data for August shows that inflation's stuck at 2.2% in the 12 months leading up to August. That is unchanged from July's figure. This is slightly above the Bank of England's target of 2%, but it's pretty much spot on. It's a good news story on the surface of it. If you dig into the details, there's a little bit of caution to flag. We saw that core inflation, which excludes more volatile prices like food and energy actually rose in the 12 months on the year from 3.3% in July to 3.6% in August. There was also a bump in services inflation, which was largely driven by increases in airfares. So you do still see some prices drifting upwards, but a lot of this has been taken into account. The Bank of England's latest projections do think that the headline inflation figure will get slightly closer to 3% before the end of the year, but then fall back down even potentially below its target in 2025. So the fact that it's hovering in the right place now is good news. This is just nothing like what we experienced the past couple of years when it came to the inflation crisis. Markets are still not expecting for the Bank of England to further reduce the base rate tomorrow. They expect that that's going to happen later on in the year, potentially in their November meeting, but today's data doesn't really change that projection. It was always anticipated that after that first major rate cut, well, actually it wasn't a major rate cut. It was very minor rate cut, but that first major moment where the bank started to reduce the base rate by 0.25% points that the bank would then quite hawkishly pause, assess the lay of the land, and wait until later of the year. And today's news kind of doubles down in terms of what markets and economists are thinking on that. The big question for me is how does labor take this data and continue to spend the story that the economy is on its knees, that it's on the brink, that if something doesn't happen, everything's going to turn to chaos. This idea that if you hadn't cut the winter fuel allowance, that there would have been a run on the pound, the economy would have plunged. It just doesn't quite add up with the myriad of data that is coming in. Look, it's nothing to write home about. It's not great. Growth has been stagnant for the past couple of months, but if you look at where inflation is, if you look at the yearly projections for growth, if you look at the labor market, which is cooling, slowly but surely it's cooling, the UK economy is in a much better position now, certainly than it was this time last year, and certainly better than people were projecting at the start of the year. This narrative that things are so bad, we have to do something, may not quite add up with what, not just what people see in the numbers, but what they're actually experiencing. I think a lot of people are quite tired, just exhausted of this constant narrative since the pandemic, that things are really bad and we're in for tough times. You can only do the tough time narrative for so long before people go, "Well, wait a second, when does it get better?" Labor's trying to reset the clock on that one, going back to the tough time soon it will get better, but they're following a government under Rishi Sunak that did the exact same thing for two years. If they are feeling a little bit better off, they may question some of those measures. We're already seeing with a winter fuel allowance as we get closer to the budget. I think two points. First of all, on the political point, Katie Ball writes this week's cover talking about Labor's threat from reform. I think there's a echo in what Kate says there about the Brexit referendum, of course, where people thought, when they had the dire fiscal warnings of George Osborne, they thought, "Well, really, things are pretty bad. I can't get any worse news as a protest." I agree that after about 15 years of narrative, Labor have got a tricky balancing act and actually saying things are going to get better because voters simply otherwise will switch other parties. I think given the sense in which all sides are preaching this narrative, there needs to be a distinguishing factor. Second, what was caused the warning from Andy Haldane about the business confidence being undermined. I think Labor needs to perhaps switch from inflation being the metric by which we've been judging governments, perhaps, and then talking about other things like businesses and wealth creation in this country. I thought it was striking this morning that CDM have reported that one of the wealth advisors has been so busy helping clients leave the UK, though they've actually not had any some holidays. I think the danger is about that could be the next thing, rather than say, the inflationary pressure is facing this country, that should be things about wealth creatively from the country, something to watch out for over the next six months or so. From the MPs that you were speaking to, James, are you sensing a fatigue from any sort of Labor MPs with this doom and gloom narrative? I think they're willing to put up with the pain. The question is, what's next? What's it all for? What's the purpose of this? I think the danger with Labor is that it squanders its political capital rather than spends it. When it takes difficult decisions, it's probably best to make sure that they're ones in the long-term, most beneficial. So, for instance, I think that when I'm PR-spoken to newly elected, then it would probably be better to do divisive planning reforms, rather than winter fuel allowance. For instance, winter fuel allowance is probably going to save less than a billion when people would take up pension credit, etc. It might be more advantageous in the long-term to press ahead with difficult issues than that, because you have diffuse interest rather than concentrated ones, unlike winter fuel, where people feel they're going to lose out on it. So, I think Labor needs to just be savvy about picking their political battles and also offering some jam tomorrow and a bit of jam today as well, because that's the danger, is that they don't have, I think, the good news narrative in the short medium term, how many projecting that very well? Kate, what's tracing has given a speech today to the IPPR on the NHS? Is that more doom and gloom? Well, it's reiterating what the Prime Minister said at the end of last week when Lord Darcy's report was published, which was just a damning assessment of the state of the National Health Service, and particularly the care, and in many cases lack thereof, that it provides to its patients. And he was reiterating essentially what the Prime Minister said last week, which was reformer die, that there's going to have to be major NHS reform. I think where this gets particularly interesting is IPPR have put out a big paper looking at the state of the National Health Service, making their own recommendations, and a lot of that is about syntaxes. A lot of that is about preventative healthcare, but penalizing people in the process of preventative healthcare to try to make them more healthy for the future. And when you get into this debate, there are always a few things that just don't quite stack up, but they're very difficult to talk about, because they're not happy to talk about. For example, if you start slapping syntaxes on more products, let's say you want to extend the sugar tax, which currently applies to sugary, fizzy drinks. Let's look at what happened there, and let's look at what might happen if you say slapped it on chocolate cake, or if you slapped it on cupcakes, or whatever dessert you want to target today. Under the sugar tax, the treasury has been raking in a couple more hundred million pounds a year. What this suggests to us is that people are not changing their behavior. There's no evidence that people are changing their behavior to the point where they would lose any kind of weight, or they would change their lifestyle. What they're doing is they're paying more to access the same products. So you can put these taxes, these syntaxes on products. When the revenue comes in, that's quite a bad sign for your policy. Means is not working. Means people are still spending the money. You're just usually for people who are on lower pay. You're taking away more of their disposable income to make these choices, which is kind of grim, especially coming. I think from that, that labor perspective, the other thing people struggle to talk about is it is the healthiest of people who will end up costing the NHS the most on average. It is the people who live into their 90s who need a decade worth of old age care, of care that you would get at the end of your life that end up costing the NHS the most. It is not the people who drop dead at 60 from a heart attack. I don't want people dropping dead at 60 from a heart attack. We all want the first circumstance. We all want people living longer. We have to figure out how to have health care systems around the world, not just in the UK that can sustain that, that can help people to live longer, healthier lives. But this entire narrative around syntaxes or bad behavior doesn't actually stack up with what really costs the NHS money and what's going to be needed in the future for reform. And James, just finally, I think it's probably fair to say that labor have had a pretty awkward week and today that's got a little bit more awkward because we've had the news that Sue Gray, Kit Starmer's Chief of Staff, is paid more than the Prime Minister. Can you take us through this one? Well, it's a suboptimal beginning to labor conference week as we head into Liverpool this weekend. This is the revelation that the Prime Minister's Chief of Staff is paid £170,000, £3,000 more than the Prime Minister. And I think that the BBC report, they did break the story, is well worth reading and filling out our encourage listeners to read it. It contains such brilliant source quotes as this. One source told the BBC, it was suggested that she, Gray, might want to go for a few thousand pounds less than the Prime Minister to avoid this very story, she declined. And what this story is about, Oscar, is about frustrations of the summer transition as we now approach the autumn, about special advisors saying they're being paid less than when they were in opposition, when the Labour Party was broke, about the slow sign off of new special advisors being appointed, about people who didn't get special advisors being disaffected and kicked out of their jobs. And this throughout paying conditions is one that could have been entirely avoided partly if Sue Gray had taken £3,000 and £1,000 less perhaps. Or also, this was going to come at some point. I think every six months the special advisors pay is released online, there's bands, you can see that. But the fact it came out, and this Intel presumably would only be confined to a very small number in the cabinet office, suggests a dysfunctional Labour machine and that all is not well at the heart of government. And I think the very fact that lives are out for Sue Gray less than 100 days into government would suggest that she probably won't be surviving the end of this Parliament over the next five years. So I think there's a lot of disaffected people, and it may sound silly, special advisors, paying conditions. But as we've discussed many times this podcast, these things can really sort of sour the mood in number 10. And we certainly saw with the last government how that can play a part in bringing down a Prime Minister. Great. Well, thank you, James. Thank you, Kate. And thank you very much for listening. [Music]