Will the economy prove to be 'Mission Impossible' for Starmer?

“Your mission, Keir, should you choose to accept it….” were the collective words of the tired electorate on July 4th last year as people voted for change, and the incoming Prime Minister was quick to translate that challenge into a specific “5 Missions for a Better Britain”. At the top of that mission list was the economic one, to “Secure the highest sustained growth in the G7” while committing to growth in productivity and good jobs in every part of the country.

Starmer is not the first Prime Minister to commit to clear missions, objectives or goals and will undoubtedly not be the last, but the relentless focus and messaging on economic growth has been about more than a simple economic goal, providing a new narrative that Labour can be trusted to deliver economic stability and growth for everyone. However, repositioning a political party is more easily explored in focus groups than at the ballot box and it is almost twenty years since David Cameron as Leader of the Opposition declared that his priorities could be summed up in three letters – NHS. Spending budgets, operational facts and outcomes aside, it is very unlikely that many people now rush out to vote Conservative because of their track record on the NHS.

 So, how is Sir Keir performing in his attempt to seize the traditionally Conservative ground and claim the economic competence crown for the Labour Party?

 There is no questioning the commitment of the top team to talk about economic growth and both the Chancellor, Rachel Reeves and the PM have taken the approach of repeating it at every opportunity. From the Investment Summit in October to the heavily growth-infused Budget later that month, to the AI Opportunities Action Plan announced this week, it has all been about growth. 

Today, we have seen the latest GDP figures which show an estimated 0.1% growth in the UK economy in November 2024, which compared to the previous two months of negative growth help to provide some much-needed breathing space for the embattled Chancellor. However, this estimated figure is half of the 0.2% growth expected by the markets and with estimates prone to change (the reality of the previous month was lower than the forecast) that breathing space may be only temporary. Crucially for the still relatively new Government, we have now had six months of GDP data since they came to power, and with four negative growth months set against two slightly positive months and a description by the ONS of the economy “flatlining” for the last quarter, the actual size of the UK economy in November was slightly smaller than it was in June.

Government woes on the economy are not limited to growth levels, with recent speculation over the falling value of the pound, higher borrowing rates and interest rates for businesses and homeowners alike. In a week of near misses for the Treasury, inflation recorded a slight fall yesterday to 2.5%, although still above the target ceiling of 2% but moving in the right direction. Add to this the enforced resignation of Tulip Siddiq as a Treasury Minister and intense media speculation around a new round of spending cuts and a potential emergency budget, and none of this is the economic backdrop that they had hoped for.

Beneath the headline GDP figures, it is the construction sector that provides the strongest glimmer of hope. While the service sector flatlined and the production sector went into reverse, growth in the construction sector outstripped the performance of the whole economy by four to one and there was growth in five of the nine construction sub-sectors. With the focus on planning reform and housing delivery, the construction sector could yet prove to be the one that delivers the promised growth.

Economically, we all (or most of us) want to see economic growth and understand that a successful economy is the bedrock of prosperity, but the top teams in No.10 and No.11 will be wrestling with two big questions – are they convinced that their policy direction will deliver the growth they so badly need, and was it wise to gamble their future success (and re-election) on a binary measure that is so easily interpreted and understood. Political spin can conceal a multitude of truths (and untruths) on education, crime and health but economic growth is the policy equivalent of red or black on the roulette table and winning or losing rests on simple economic data.

Yes, we are still in the early stages of a new government and as has been borne out so clearly in recent years, a week really is a long time in politics. The latest possible date for the next general election is 15th August 2029, and with 10.49% of this electoral term already over, the big question is whether Starmer and Reeves can deliver the elusive goal of economic growth or whether this Government is on course to self-destruct in 55 months