Rishi Sunak hasn’t had much good news of late. The BBC’s ‘fact checker’ declared this week that he has achieved only one of his five priorities this year – bringing down inflation. As has been pointed out multiple times, bringing down inflation is not something entirely in the Prime Minister’s control and it has been falling across the continent. But the news yesterday that inflation slowed sharply to 3.9 per cent in the month of November – well below predictions – could yet give Sunak a boost as speculation grows that next year could have better economic news than expected. Economists are now predicting a fall in borrowing costs and that the Bank of England could cut interest rates earlier than expected.
One of the big concerns in government going into an election year (Sunak confirmed on Monday that the election will be in 2024 rather than January 2025) has been a backlash from the 1.6 million property owners who have to renew their mortgage next year. Most will currently be on rates below 2.5 per cent, raising fears of a mortgage timebomb as they face much steeper payments. This prospect of voters having to move to much steeper deals in an election year has led to some Tory MPs declaring the election lost and others claiming Sunak ought to have gone to the polls this year before more mortgage holders were hit by increased payments. Following Wednesday’s news, the cost of a five year fixed-term mortgage has fallen below 4 per cent for the first time in months, with further falls predicted in the new year.
But the other aspect raising spirits in the Conservative party is that a fall in borrowing costs could mean Jeremy Hunt has more fiscal headroom for tax cuts in a pre-election budget. When I interviewed the Prime Minister for the Christmas issue of The Spectator, he promised a ‘gear shift’ in taxation: ‘We are in a position to be able to do all that because we have got inflation down. The economy has turned a corner and that means that there can be a gear shift in how we approach taxes’.
This is why one of the ideas currently under discussion in Downing Street is a new year’s speech focusing on the economy. As problems with ‘stopping the boats’ grow, Sunak and his team are more comfortable trying to take the fight to Labour on the economy. Downing Street wants to pitch the election as a choice between the Tories controlling spending and lowering taxes (despite the tax burden still rising) and Labour borrowing billions for green spending.
This article is free to read
To unlock more articles, subscribe to get 3 months of unlimited access for just $5
Comments
Join the debate for just £1 a month
Be part of the conversation with other Spectator readers by getting your first three months for £3.
UNLOCK ACCESS Just £1 a monthAlready a subscriber? Log in