Crisis for Labour as cost-of-living woes snare Starmer

PRIME Minister Keir Starmer’s failure to allay concerns about the cost of living is driving dissatisfaction with his government among Britons, adding to economic grievances dating back to the 2008 global financial crisis.

Starmer won the biggest parliamentary majority since 1997 for his Labour Party in 2024 after 14 years of Conservative-led government.

But less than two years on, Labour is polling at 17 per cent and Starmer’s future as leader is in doubt.

“People were hoping for better things than what has actually transpired, so I think that feeds through to some of the negativity we are seeing now,” said Neil Bellamy, consumer insights director at GfK, which has surveyed British household sentiment since 1974.

Starmer is not alone: his French and German counterparts Emmanuel Macron and Friedrich Merz have equally poor ratings, in no small part due to economic unhappiness.

Organisation for Economic Co-operation and Development data shows consumer sentiment has declined more in Britain than G7 peers since Starmer came to office, while polling company YouGov shows the economy overtook immigration as Britons’ top worry late last year.

A surge in inflation to more than 11 per cent after Russia’s 2022 invasion of Ukraine — which coincided with bond market turmoil under Liz Truss’ brief premiership — pushed sentiment indicators to a record low from which they never quite recovered.

The conflict in Iran has renewed pressures, driving oil prices up almost 50 per cent.

While wage growth has been fairly strong since the Covid-19 pandemic, it has not kept pace with price rises, and household after-tax income in real terms is 0.4 per cent lower than at the end of 2019.

“The cost of living crisis is still very much fresh in the minds of people. They see inflation going up again and it’s a bad hit at a bad time,” said Stephen Millard, deputy director at the National Institute of Economic and Social Research.

Cost of living increases have been concentrated in highly visible areas such as food, fuel and hospitality, with food prices now more than a third higher than at the start of 2022.

“If you go to the supermarket to buy your daily products … they’re a lot more expensive than they were four or five years ago,” said Bellamy.

This has not been lost on Starmer, who recently postponed a planned rise in fuel tax and whose finance minister Rachel Reeves has shifted some environmental levies away from energy bills and into general taxation.

There is a long-running and heavily political debate about the more deep-rooted sources of Britain’s economic difficulties.

These range from austerity imposed after the global financial crisis to the harm caused by Brexit, rising taxation or the persistent regional inequalities highlighted by Greater Manchester Mayor Andy Burnham, a leading challenger to Starmer.

But most economists agree that slow productivity growth — the amount of extra output produced per hour worked — since the 2008 financial crisis is the heart of the problem.

“We have gone from incomes doubling roughly every 10 to 20 years, to rates of income growth, particularly at the bottom, that are more like … hundreds of years for incomes to double,” said James Smith, chief economist at the left-leaning Resolution Foundation think tank and a former Bank of England official.

While almost all advanced economies saw productivity growth slow after the crisis, Britain had a worse hit — probably due to its greater reliance on financial services.

Faster growth has been a goal for Starmer, as it has for previous British governments, and the International Monetary Fund recently praised policies to streamline construction permits, tackle skills gaps and make it easier for fast-growing companies to access long-term finance.

But British voters may lack the patience for plans to improve living standards that take years to deliver.

“If you are a consumer … what you have experienced is a series of very negative hits to living standards,” said Pantheon Macroeconomics’ chief economist Rob Wood.

“It’s not all that surprising that people aren’t particularly optimistic about the economy. And you won’t find many forecasters that are optimistic about it either.”

The writer is from Reuters

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المصدر: New Straits Times