Could Starmer and Reeves get lucky with the economy?

Rachel Reeves must be psychic. On Tuesday, she delivered a speech that attracted attention for a single word: she accused Rishi Sunak and Jeremy Hunt of “gaslighting” the British public. It was an attempt to neutralise forthcoming good news about the economy by suggesting that it would be somehow false. Then on Friday, the independent Office for National Statistics published the GDP figure for the first quarter of the year, up 0.6 per cent from the previous quarter, which means, to use the technical macroeconomics term, the British economy is “motoring”.

Also on Friday, the International Monetary Fund published its forecast that the British economy would grow faster than the other European members of the G7 over the next five years. But because the shadow chancellor had used the word “gaslighting” beforehand, she was spared the unpleasant duty of having to congratulate the government on turning the corner and ushering in the good times. “Gaslighting” is on the Banned List. It is an unpleasant term, and a social media cliche, from that 1944 film about the husband who conceals his murderous crimes by persuading his wife she is going mad. Some critics didn’t think Reeves should have used it because it is not widely enough understood. I disagree. I don’t like it, but it attracted my trade’s attention and was widely quoted in headlines.

It meant the speech was a success in that it conveyed a simple message: you can’t trust what the government tells you about the economy; you should trust what you “feel” instead. Given that most voters’ feelings about their living standards, and about the Tories’ economic record, are strongly negative, you can see what Reeves is up to. It has the unfortunate implication that the ONS and IMF are not to be trusted, but all’s fair in politics and Reeves has an election to win. She doesn’t want an economic recovery to ruin it.

There are more sophisticated ways of trying to play down evidence that prosperity is returning. One quarter’s numbers are provisional and erratic and could easily be contradicted by the next batch. The figures for national income per person don’t look so good because the population has increased — quite dramatically. But they don’t look bad, and a party that set as a “mission” the target of the highest growth rate in the G7 ought to at least acknowledge an IMF forecast for the likely period of the next Labour government that puts the UK third out of seven (behind the US and Canada). However, politics is a crude business, and Reeves wants to remind people that they feel worse off and to invite them to ignore “lines on a graph” that tell a different story. But what a story that could be for an incoming Keir Starmer government. This week’s figures open up the possibility that the pessimism about the worst inheritance bequeathed to a new administration has been overdone. The Conservative public spending plans for the years after the election still fail the credibility test, and it remains true that even if the Tories were re-elected they would also probably have to put up taxes further. But it is amazing what a difference a bit of economic growth can make to the public finances.

It is probably too late for good economic news to make a difference to the Tories’ electoral prospects, even if people do start to believe, despite Reeves’s best efforts, that things are getting better. Chris Mullin, the former Labour MP, recorded the private views of Nick Brown, who had been Gordon Brown’s chief whip, in October 2014, seven months before the 2015 election: “We will probably lose. Our numbers one and two are not credible compared to the incumbents. The economy is picking up.”

We are now no more than seven months away from the 2024 election, and the situation looks different. Starmer and Reeves are credible compared with Sunak and Hunt. And if the economy is picking up, it may be too late to erase the memories of recession, inflation and meltdown in the money markets.