Regardless of their differences, Starmer and Sunak face the same obstacle Economics Editor Larry Elliott

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Think back 12 months to January 2022. Boris Johnson was prime minister and resisted calls to shut down in response to the Omicron variant of Covid-19. It was assumed that the inflationary pressure caused by post-pandemic supply chain bottlenecks would soon recede. The Russian invasion of Ukraine was several weeks away. There were howls in the Labor Party over Sir Keir Starmer’s failure to score a significant lead in the poll.

All of this is a way of showing that a lot can happen – to the economy and politics – in the course of a year. Given that the next elections will not be held until 2024, it is unwise to assume that the coming year will be more predictable.

However, the first few days of 2023 have provided clues as to the strategies the Conservatives and Labor will adopt in the coming months. The speeches delivered by Rishi Sunak and Starmer last week were light on detail but important.

Of the five pledges made by the prime minister in his speech, three related to the economy: halving inflation by the end of 2023; To resume growth and to ensure a decrease in the national debt.

These are not ambitious goals. Most forecasters expect the inflation rate to drop from its current level of 10.7% to around 5% by the end of the year, and it should be noted that lower inflation does not mean lower prices, but rather that they are rising at a slower speed. . In any case, reducing inflation is the task of the Bank of England.

Sunak hasn’t been specific about when the other two pledges will be fulfilled, which makes them pretty much meaningless. It is entirely possible that the economy will register modest growth by the end of the year, especially if the recent decline in global energy prices continues. However, the prime minister clearly felt unable to stick to a set timetable.

As for the third pledge, while there is not the furthest possibility of declining debt as a share of national income this side of a general election, the Office for Budget Responsibility said in its November fall statement that the government’s plans are in line with its own. The goal is to have the debt ratio down within five years. Once again, Sunak chose an easy target he knew he would meet.

The Prime Minister and his adviser, Jeremy Hunt, are hopeful that if they can survive this winter, something might emerge. As it may be. If gas prices continue to fall, inflation will fall more quickly and the government will save billions of pounds in subsidizing energy bills. HSBC says Hunt could have an extra £7bn at his disposal: Capital Economics thinks it could be at least £10bn. This savings could be used to increase spending on the NHS, cut taxes or increase wage offers for public sector workers. Warm winter in Europe is a stroke of luck for the government.

The pain Hunt announced in November has mostly been postponed until after the election, which makes economic and political sense. The chancellor says he had no choice but to announce tax increases and spending cuts, and that Labor would broadly adopt the same approach if it were in charge.

In a way, this is a tribute to Starmer’s success in defusing the notion that Labor will blow up the economy with reckless spending pledges. Polls show that Labor has the same confidence in running the economy as the Conservatives. However, there is a distinct danger of going too far in the other direction and appearing bland. This was what Starmer was seeking to counter in his “Retake” speech last week, as he raised the tone for the “Red Wall” voters who deserted Labor at the last election.

Starmer’s political message was clear. We, the Labor Party, understand why there is strong support for Brexit in the less prosperous parts of the country. We have no intention of seeking to reverse the decision to leave. Instead, we intend to take back control of a full range of powers – from employment support to the climate crisis – from the center so that local people can determine their own future.

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However, leveling up means money – big money – as well as transferring power. A recent study on German reunification — the largest settlement project in recent decades — said Berlin had invested the equivalent of what the UK government spent on the furlough scheme during the pandemic every year for three decades, and so far the gap between the western and eastern provinces has not been fully closed. Multiparty support for large-scale spending has been vital in Germany, and will be vital in the UK as well. There’s no way the level-up could happen if Starmer kept the government’s “big checkbook” closed, he insists.

Getting the right message is important because Starmer is the one who loses everything. He is the highest pollster, while Sunak – like Alec Douglas-Home when he took over from Harold Macmillan in 1963 – has a chance of none.

Like Home, Sunak took office after the Conservatives had been in power for 12 years and with the party mired in scandal. Not even Conservative MPs expect him to win the election, and if Sunak succeeds in repeating Douglas-Home’s feat of slashing Labor’s lead and losing only a handful of seats in 2024, he will do better than his predecessor in the 1960s.

That’s because the economic conditions are completely different. Douglas-Home helped create an unsustainable boom before the election in 1964. Halving inflation and getting the economy back up and running again really doesn’t compare.

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