Boris Johnson may have hoped for easier weeks to start his political confrontation. The recovery of the economy is vital if the prime minister wants to stay in office after 148 lawmakers told him they did not trust him. Things are not going to get easier for a while. Speaking in Lancashire earlier this week, the prime minister said voters could be “confident that things will improve, that we will get out of this strong country with a healthy economy”. By “this”, Johnson meant a cost-of-living crisis that paid off hopes of a speedy recovery from the pandemic, a crisis that pushed government borrowing to levels never before seen in peacetime and taxes as a share of their national output. . higher than the 1940s. Russia’s invasion of Ukraine has meant that prospects have deteriorated over the past three months, and the message from Rishi Sunak to his fellow ministers is that Britain is facing difficult times. It will be next year before the outlook for the economy shows signs of improvement and the coming months look particularly difficult. Rising gasoline prices will exacerbate the cost of living crisis. Squeezing living standards will reduce consumer spending at a time when business confidence is weak. A summer of stagnant inflation is approaching and that, according to some analysts, means that the threat to Johnson has not disappeared. Gasoline is around 2 pounds per liter. Photo: Amer Ghazzal / Rex / Shutterstock Kallum Pickering, a senior economist in Berenberg, said: “The risk of a worsening economy in the summer, as well as bad results in the upcoming elections, such as in West Yorkshire and Devon on June 23, could turn the tide against Johnson. “If he does not make dramatic improvements in opinion polls in the coming months, it is likely that Johnson will face new challenges for his leadership.” To some Tory MPs, the way to get Johnson back is obvious: tax cuts. They blame at least part of the government’s unpopularity on the decision to break a 2019 election commitment by raising national insurance premiums to pay higher NHS and social care spending. “The overall tax burden is very high now – and sooner or later, and I would rather it was later than later, that burden needs to be reduced,” Johnson said this week. “You can not spend your way out of inflation and you can not tax your way to growth.” . Tax cuts are coming, but not yet. The chancellor is wary of massive gifts at a time when his room for maneuver is being eroded by rising inflation and higher interest rates. The amount employees can earn without paying national insurance increases from 9. 9,880 to .5 12,570 on July 1, but no further announcements are scheduled before the autumn budget. Samuel Tombs, the UK’s chief economist at Pantheon Macro, said it was “not surprising” that the prime minister was considering lower taxes, but said the scope was limited unless the Treasury was ready to cut its budget. rules. These rules set targets for balancing day-to-day government spending with tax revenue and reducing debt as a percentage of GDP over three years. “Tax cuts, however, will have to be too big to fundamentally change the economic outlook,” Tombs said, adding that the government would have “more money to hit” by increasing welfare payments for low-income households. The shadowy chancellor, Rachel Reeves, saw Risi Sunak’s belated turn into an unexpected tax as a major victory for Labor. Photo: Jeff Overs / BBC / PA Meanwhile, the Labor Party believes that their message of “tax fairly, spend wisely, grow the economy” is being passed on to voters. Rachel Reeves, the shadow chancellor, saw Sunak’s belated turn into an unexpected tax as a major victory for the opposition, which during the pandemic often struggled to get a public hearing. It will be worrying for the Conservatives that Labor has closed the gap in the polls for the best party to run the economy and this concern is likely to grow as the months approach the next election. For now, however, the prime minister will be able to falter, in part because there is no apparent pioneer to replace him. Nor is there an easy policy lever that a new Downing Street 10 owner could pull. When Margaret Thatcher was ousted in 1990, her successor, John Major, was able to lose the unpopular election tax. Theresa May’s failure to end the Brexit conflict has resulted in Johnson becoming prime minister in 2019. This time, the unhappiness with the prime minister has more to do with character and suitability for office than with politics. Supposed skeptics, such as Jeremy Hunt, present themselves as a clean slate after Partygate instead of offering a total policy change. Subscribe to the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk Adam Cole, head of currency strategy at RBC Capital Markets, said that even if Johnson left, it was not clear that there would be a significant change of direction. “When Sunak was the favorite to succeed Johnson, it would make sense to expect a shift to fiscal orthodoxy, but that is no longer the case.” In the absence of immediate tax cuts, the prime minister has embarked on a long, hard struggle to dig out a political hole with a (renewed) commitment to extend tenant housing rights and a promise to accelerate supply-side economic growth through supply-side reforms. But these measures will take time to work, and Johnson needs quick results. History has shown that this is a good thing. History also shows that he will leave before them.
