Investment Institute
Macroeconomics

UK General Elections: A one horse race to Number 10

  • 21 June 2024 (10 min read)
KEY POINTS
Since UK PM Rishi Sunak announced there would be a snap general election on 4 July, little has changed in the polls. Labour looks set to win with a comfortable majority – with some even suggesting a landslide victory.
The Labour party is focused on supply-side reforms – including shaking up the planning system and investing in the green transition – while the Conservatives have pledged to cut taxes and reform the welfare system.
Both major parties have committed broadly to the same fiscal rules and have ruled out raising the three main taxes: National Insurance, Income tax and VAT. They will retain the freeze on income tax thresholds for at least the next three years and implicitly will be frugal on spending.
The stark reality of the public finances, however, will likely require the next government to implement additional fiscal tightening but we believe there may be some economic benefit to such an approach.

UK Prime Minister Rishi Sunak surprised even the keenest political watchers by announcing that the next UK general election would be on 4 July, earlier than the expected October/November date. A key question was why the earlier election? One answer was probably that things were unlikely to get much better for the Conservatives.


On the economic front, Sunak was likely buoyed by the chunky 0.6% quarterly rise in GDP in the first quarter (Q1) and the drop in inflation back to within the 0.5% range either side of the 2% target in April (now at target). Two of his five main pledges were to halve inflation and boost growth. Moreover, the timing was likely aimed at catching the opposition off guard, although interestingly this might have been less targeted towards Labour – who have been prepared for an election all year – but more so at Reform UK.


The gamble doesn’t appear to have paid off. Polls suggest Labour is still on track to win a significant majority, while Reform UK is closing in on the incumbent party. In this paper we examine the current polling and consider what this will mean for government formation; we run through the key main policy differences; and discuss the stark reality of the public finances facing whoever wins on 4 July. We then consider some broad market implications.

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