22nd April, 2022

GK Point of View – David Laws on the Prime Minister’s survival

Perspective by David Laws, GK Adviser

The issue of whether Boris Johnson can remain as PM is firmly back on the agenda. The Prime Minister faces multiple risks over the six months ahead, which include: the local election results; possible additional “partygate” fines; the release of the Sue Gray report; and now an investigation by the Privileges Committee. Any one of these could trigger events that would end the PM’s time in Downing Street.

But the ever-resilient Mr. Johnson will still feel that he is in with a chance of recovering, and in a much better position than he was, just a few months ago. His predicament previously looked terminal, and Rishi Sunak was heavily tipped to take over. What changed? Well, three things. The police intervention scuppered the Gray report, and led to a “drip,drip” of problems rather than a cascade. Then, the invasion of Ukraine intervened – dominating the news agenda and causing Conservative MPs to think twice about the timing of any attempt to topple their leader. And, finally, Rishi Sunak’s star has faded dramatically: his wife’s non dom status, his failure to address the cost of living crisis, and his own partygate fine appear to have hugely diminished his appeal and his prospects. His odds of becoming PM have collapsed

So, Boris is still in place, and after each piece of bad news he will be able to argue that his MPs should defer judgement until some later occasion – the Gray report or perhaps now the Privileges Committee investigation, whose results could now be months away.

Johnson still faces considerable risks, but the odds of him surviving as PM into 2023 are perhaps now 60:40 in his favour. Not long ago, he looked overwhelmingly likely to lose office, so his circumstances are still much improved.

The PM’s predicament – still in power but widely discredited – and the collapse of support for the Chancellor, is all extremely good news for the Labour opposition. They have not, of course, secured the Johnson “scalp”, but they have avoided the situation in which the Conservative Party simply switched Boris for another election winner. A discredited PM and damaged Chancellor is a gift to an opposition which now looks capable of winning an election against an imploding government, but not strong enough perhaps to win on the basis of its own programme alone.

The odds in the bookies, where Rachel Reeves is tipped as the next Chancellor and Keir Starmer is well rated to be the next PM, indicates that Labour’s programme for government needs to be taken more seriously by the business and investor community than for perhaps a decade.

Although Starmer’s Labour Party is far more moderate than that of Corbyn’s, it would still likely make major changes to taxation, business and labour market regulation, public spending, and relations with the EU.

We will want to look in detail at this programme over the months ahead. An election does not need to be held until mid 2024, but investors will increasingly factor this into their calculations.