Can the government win the next election during a recession?

Once again, the Conservatives will be hoping for green shoots of recovery, writes Sean O’Grady

In the past, governments of all parties have emerged from the deepest economic gloom (PA)

It’s a question well worth asking as the economic cycle becomes increasingly separate from the electoral cycle over the coming two years: can a government win a general election during a recession?

The general answer to that is no, for obvious reasons. Indeed, there is only one post-war example of a government holding a general election right in the midst of a slump, which is when Edward Heath asked voters for a mandate to deal with industrial unrest and inflation in 1974. He won a narrow majority of the popular vote, but lost too many seats and was swiftly ousted.

But the corollary is that if an economy is emerging from a recession, whether through good luck or wise stewardship, the government of the time has a much better chance of winning another term.

With the last possible date for a general election falling in the early weeks of 2025, much depends on how the economy stands during the summer to autumn of 2024. We know 2023 will be a dire year economically, with an unprecedented fall in household living standards, high inflation and mortgage rates, house prices slipping back, and unemployment rising.

Local elections next May will give the government a clear picture of the mood of the electorate, which will probably be fairly angry; further substantial losses of council seats and local authority control loom for the Tories. It will be the same kind of story in any by-elections held during the period of deepest gloom.

With regard to 2024, it depends on who you ask. Even allowing for the time difference between the dates when they were published, there is some variation in the forecasts of the two main official bodies. The Bank of England thinks Britain will still be in recession, as part of the longest such downturn in recent history. On the other hand, the Office for Budget Responsibility (OBR) takes a much more sanguine view, with really quite strong bouncebacks delivering healthy growth of 2.7 per cent in 2027, albeit far too late for polling day.

The OBR seems to be more persuaded by a likely rise in the levels of “legal” (their word) migration to the UK, despite the surrounding controversy.

There is hope here for the Tories. In the past, unpopular governments of all parties have emerged from the deepest economic gloom and found their standing also miraculously transformed.

The Labour government in the 1970s, for example, looked unsalvageable when it had to ask to be rescued by the IMF in 1976. But by 1978, thanks to a combination of North Sea oil coming onshore, tax cuts, and inflation and unemployment coming down, the party had every reason to suppose it might win a general election – though in the event the opportunity was missed, and defeat followed in 1979.

A more apposite example might be the Conservative victories in 1983 and 2015, both occurring after prolonged periods of unpopularity and financial hardship, but with campaigns based on the idea that the sacrifices had been worth it, and there were better times to come.

It seems to matter greatly that the economic trends at least start moving in the right direction – mortgage rates, inflation, the jobs market. The flow of economic news, often amplified by a pro-Tory press, can make the most of an emerging recovery, as demonstrated by chancellor Norman Lamont’s “green shoots” ahead of the April 1992 election – another occasion on which the Conservatives avoided defeat.

A pre-election “giveaway” Budget, with carefully targeted tax concessions and spending pledges, can also help to turn things round, and convince floating voters that their misery was not in vain.

But there are exceptions. Some governments presiding over relatively benign economic conditions are still rejected by voters who carry the painful recollection of some symbolic disaster of economic mismanagement, and a lingering fear that the governing party is too divided or incompetent to be trusted again.

Even with a growing, low-inflation economy, the Conservatives finally lost power after 18 years in 1997 because of the ERM disaster of 1992 and the subsequent tax-hiking Budget of 1993. It was a similar story for Labour in 1970, with memories of the humiliating devaluation of the pound in 1967 still raw, despite sunnier economic times.

Again, and unfairly, Gordon Brown found himself blamed for the banking crash of 2008-09, despite having been responsible for a successful global rescue plan. By polling day in 2010, the economy was well past danger – but it was all too late.

It’s all very uncertain, but the contours of the political scene in 2024 can be guessed at. The worst of the recession will have been suffered in 2023, and inflation and interest rates should be coming down. The war in Ukraine might be over, and world trade might be expanding again. One or more of Russia, China and Iran might have become less hostile towards the West.

There will be more optimism by 2024, but it’s difficult to say whether the economy will have turned a corner. Wages and living standards will still be squeezed. There won’t be much room for tax cuts in the pre-election Budget that year, but there could be some, and possibly the promise of more later once the recovery takes off.

Labour will get tangled up about its own fiscal plans, as so often happens before a general election, most notably in 1992 and 2015. Memories of Liz Truss and Kwasi Kwarteng, let alone the austerity of the Cameron-Osborne years, will have faded. Boris Johnson and Theresa May will be somewhat historical figures. Brexit won’t be such a live issue in the same way. The Tories may have begun to close their polling gap with Labour.

However, voters will be entitled to ask what the country has to show for what will by then have been 14 years of Conservative government – and whether Brexit was worth it. They will also be mindful of how the chaos of 2022, and the recession that followed, did so much damage to them and their families. Will they be prepared to give the Tories a historic fifth successive term in office? It’s impossible to say.