UK Prime Minister, Rishi Sunak, is at risk of failing on the very promises he set out to achieve when he took office. At the start of the year, Sunak made five pledges, which he said would be the measure of his performance. These were to halve inflation, grow the economy, reduce the national debt, shrink waiting lists in the National Health Service (NHS), and stop migrants from crossing the English Channel.
However, halfway through his tenure, it appears that Sunak may fall short on all of these promises, leaving him facing a probable general election in 2024 having failed on his own terms.
Inflation: Stuck
Sunak pledged to "halve inflation this year." However, inflation ended 2022 at 10.5%, meaning it needs to decrease to around 5.25%. In the beginning of the year, this seemed achievable because the Bank of England and Office for Budget Responsibility both predicted that inflation would fall to below 4% this year. Nevertheless, with the labor market being so tight, which is crucial for controlling inflation, the government's ability to achieve its primary goal is in question.
Furthermore, inflation held at 8.7% in May, and core inflation, which reflects how ‘sticky’ prices are, reached a 31-year high of 7.1%. The BOE's recent 50 basis-point rise in interest rates is evidence the fight against inflation – Sunak's key goal – is not going to plan. However, given that energy prices are falling, Bloomberg Economics thinks Sunak may still deliver on his goal, but only just.
Growing the Economy: Mixed
Sunak promised to "grow the economy." The UK economy is growing, though it hasn't recovered from the output lost during the pandemic, with only Germany matching this same position out of the Group of Seven nations. Nonetheless, some growth is still better than no growth, especially considering that when Sunak made his commitments, the OBR and BOE predicted lengthy recessions amid a deepening cost-of-living crisis. Additionally, the OBR suggested the UK economy would start rebounding only in the final quarter of 2023, a goal which Sunak converted into a commitment.
Until recently, it seemed Sunak was on track to deliver. After having lost a quarter of growth due to the coronation's extra holiday, economists were predicting steady, yet unspectacular growth in the second quarter. Nevertheless, some economists are predicting that a recession may be required to tame inflation finally.
Debt: Rising
Sunak also promised to make certain that “our national debt is falling.” Unfortunately, UK government debt raced above 100% of GDP in June, marking the first time this has happened since 1961. The somber landmark is not just embarrassing for Sunak, it also has notable political ramifications, making it more difficult for the PM to implement the significant tax cuts several Tories argue are necessary to avoid electoral defeat.
Inflation, yet again, is the root cause of the issue. The Treasury is spending billions to aid struggling households, frequently in the form of energy subsidies and other payments. Although support payments are temporary, what does greater damage to Sunak's plans are the increased debt costs caused by rising gilt yields and interest rates. The UK government bonds attached to the Retail Prices Index is a significant factor, reflecting 25% of its bonds. The OBR's current assessment of public finances as of March estimated that the UK government had only £6.5bn ($8.3bn) of headroom against its main fiscal rule of lowering debt as a percentage of GDP within five years.
Healthcare Waiting Lists: Record-Breaking
Sunak also claimed that he would make certain “NHS waiting lists will fall,” a healthcare commitment that has been broken. The NHS saw its waiting lists increase to a record 7.4 million people in April, according to data published by the health service in June. The rise is taking place while the government is also dealing with ongoing labor disputes over pay, resulting in nurses, paramedics, and doctors walking out. The number of appointments rescheduled due to strikes since December is already over 542,000, according to NHS Providers, and that number is set to grow.
Despite the majority of unions representing NHS workers accepting the government's wage proposal in May, the Royal College of Nursing refused it and promised further strike action. Health leaders attribute the increase in waiting times to staff shortages, regulations put in place due to the COVID-19 pandemic, and more people seeking treatments.
Stopping Migration: Not Achieved
Sunak's boldest pledge was to “stop small boats” carrying migrants from crossing the English Channel. Parliament did approve the government's controversial Illegal Migration Bill in April, and the figures indicate that there has been a slight reduction in the number of arrivals compared to last year's figures.
However, the numbers have risen again with better weather in June, and almost 11,000 have made their way across the Channel this year, including more than 3,300 this month. It's unclear how the government intends to tackle the backlog of asylum cases, which has boosted to over 130,000. Sunak was also unsuccessful in keeping his commitment to deport migrants on flights to Rwanda, as a court order from the European Court of Human Rights prevented the first flight from taking off last year.
The government's strategy is to spend roughly £5 million a day housing asylum seekers in hotels, procure barges to house migrants, and fund better enforcement across the Channel with a £478 million deal with France. Unfortunately, there has been little return on investment in this endeavor.