How have British politicians fared this year, and what does the future look like, behind all the brave facades?
Do the regional elections next year matter?
What does the betting market tell us?
Is Reeves’s mess redeemable?
The Tory Party conference went better than many expected, although I still struggle to see how changing leaders (again) would help anyone. Attendance was down, and the draw of a leadership contest was absent. Several big guns were keeping a low profile, no Moggy, no Suella for instance.
Kemi felt a little on notice, slightly defensive, protected but not hidden. Spirits were good, hangers on fewer, drink consumption prodigious. Behind the scene some sensible rebuilding and updating was going on, with new realism and atypical professionalism.
Just a face
But it is all a façade. Farage is pretending to lead a political party, Kemi is pretending to lead a united party, Starmer is pretending to lead and Davey is just pretending.
Farage has had a brilliant year, stacking up by-election wins from a virtually zero start, but little is of any substance; it can drain away in one news cycle. He has no shadow cabinet.
From this website
Starmer must hope never to have another year like this; governing needs stability. Davey has done OK.
Odds
The betting markets now have Reform the favourites, to both win the next election and they lead the betting to provide the next Prime Minister, but his odds are still only around four to one. Various Labour leadership options cluster around seven to one, with Kemi out at about fourteen to one, ahead of various Tory pretenders.
These are thin markets and volatile, of course. By 2027 parties will need to decide if they have the right leader for the next election. But all of that feels pretty distant still. There is really no imperative for change in the established parties.
By contrast Farage is trying to keep an extraordinary surge going, and hoping his threat, as it did with Sunak, draws tactical errors. It is not till 2027 that the major Tory defectors will decide. There are rumours of sitting Tory MPs having substantial inducements offered if they jump ship now. Clearly his backers need results now.
One clear divide in the Tory party (and I suspect others) was between those expecting that leafletting and door knocking still matter, and a fair-sized faction keen to simply (like Farage) rely on social media.
A model with about 75% accuracy level, of predicting voting intention nationally, by elector, is probably available for about £3 million, or about £5,000 a Parliamentary seat.
To set up an effective agent/branch volunteer network, would cost ten times that, even spread over several seats, still a lot more. While in reality the Tory party is only targeting perhaps 150 winnable seats.
Does that provide higher accuracy than the traditional shoe leather? Before Reform, I would say not really, but with the fragmenting of the electorate, I suspect yes, it is. Reform has upended models of who votes. On recent evidence, the lovingly curated voting and targeting database from Central Office, is an inferior data source.
Celtic concerns
A lot is said to hinge on Scotland and Wales next spring. I don’t think they matter. At the next General Election, I see 30 seats migrating to the SNP from Labour (from their 37 held now).
In Wales half that are lost by Labour (from 27 now), but credibly creating far more actual Reform seats, as there is no Tory MP in Wales now.
These numbers are quite small.
As for their own Parliaments the prospect of a Reform win in Wales is much discussed. Again, unlikely, under the proportional representation system, used both in Scotland and Wales, the nationalists will do well, but (comparatively) so do all other minor parties. Reform won’t win outright.
Next?
Where does that leave us? Starmer still has it all to play for. While the key issue for Tories is to avoid a left/right split.
That wound is still deep, and Kemi is not ministering to it, but then neither would Jenrick, her likely replacement.
Her vulnerable flank is Reform, not, so far, the Liberal Democrats, who have largely picked off their Tory marginals. But it is now clear, the lost fragment from a Tory split would be on the left of the party.
Is all lost to the UK?
How bad is Reeves? In absolute terms, not terrible, the economy can survive, what is damaging is the sense of doom, she created, and a crippling uncertainty. She’s over promised and still under-delivering. I was struck by Andy Haldane (in last weekend’s FT) equating her chilling effect on growth and capital investment to that of the Brexit Referendum, in its year one impact.
Business is sitting on its hands, and the savings rate has risen. Which in part is why her fiscal stimulus, through higher public sector pay, has failed to feed into consumption, while the inflationary impacts of her tax raising are all too evident.
From: this website – speech by CL Mann, BoE.
If that holds interest rates high, the damage just compounds. This is a tactical error by her, compounding a political error by Starmer.
Get two “one and done” budgets wrong, and she’s gone. The markets will see to that.
Yet real action still seems unlikely, this is not a brave government. The mood music, and both the late budget date, and the OBR leaks, look far more likely to see some fundamental reforms and several gimmicks.
So, like many others, I expect bad things from this budget, but adorned with crowd pleasers and tricks and feints.
Markets
Markets still talk bullish, but I don’t trust them. Fundamentals, in a rate cutting cycle, are fine. But in a couple of weeks we hit November, the big institutions get much less brave into the year end.
The US Government shut down can get ugly.
Tariffs and judicial unease will rumble on, providing plentiful reasons for a skittish market to bolt.
Potemkin” most commonly refers to a “Potemkin village,” which is an impressive façade built to hide an undesirable reality. The term originated from stories about Russian statesman Grigory Potemkin, who allegedly built fake, elaborate villages to impress Catherine the Great during her visit to Crimea in 1787.
With thanks to Gary Arndt from the website everything-everywhere – for our top picture of a Potemkin town.