Labour is living in a fool’s paradise if it thinks it has plenty of time to turn Britain around | Larry Elliott

All governments go through bad patches, when nothing seems to go right and voters turn against them. Often they bounce back from the midterm blues and go on to be comfortably re-elected. That said, Labour’s current unpopularity is in a class of its own. It is not just the scale of its problem, with opinion polls suggesting support for the party has almost halved, from 34% to 18% since the 2024 general election. Nor is it simply the speed at which disillusionment with the government has set in, though that too is unprecedented.

What’s really remarkable is that the public is not normally this negative about a government unless the economy is in the deepest of slumps. If the UK had double-digit unemployment and house prices were crashing, Labour’s political predicament would be a lot easier to explain.

Clearly, 2025 has been a far from vintage year for the economy, but it hasn’t been that bad either. Britain has trundled on in much the same way it has since the global financial crisis of 2008. Economic performance has been mediocre but not disastrous.

True, growth has slowed since a strong start to 2025 and unemployment has edged up. At 5.1%, the jobless rate is a full percentage point higher than when Labour came to power in July 2024, but still a long way short of the levels seen in the deep recessions of the early 1980s and early 1990s. What’s more, for those in work, living standards have been rising, because wage growth has outpaced inflation. Governments normally benefit when voters are better off, but this one hasn’t.

Past Labour governments have been through much worse years without suffering such a marked drop in public support. In 1947, Clement Attlee’s administration was buffeted by a series of adverse shocks, with fuel shortages during a brutally cold winter followed by a sterling crisis in the summer. Rationing imposed during the second world war was still in force.

In 1975, inflation hit a postwar peak of 25%, eventually leading to a run on the pound and spending cuts imposed on Jim Callaghan’s government by the International Monetary Fund in late 1976 as the price of securing a loan. It took many years for Labour to recover from that humiliation.

More recently, in 2008, the near-collapse of the banks during the global financial crisis led to the economy shrinking for more than a year. From peak to trough, the economy shrank by more than 6%. In the past year it has grown by slightly more than 1%.

Labour is confident that its political fortunes will improve, as voters start to feel the benefits of rising incomes and lower interest rates. That certainly happened in the past, although the impact has not always been enough to save the party from defeat at the subsequent election.

Attlee narrowly won in 1950 and secured Labour’s highest-ever vote share, despite losing the 1951 election. The economy grew strongly in the two years after the IMF loan, and by 1978, Callaghan toyed with the idea of holding an autumn election. He eventually lost in May 1979, as did Brown in May 2010.

Starmer is the most unpopular prime minister on record. His approval ratings are worse than those of Callaghan – who, even after the strikes in the 1978-79 winter of discontent, remained a more popular choice for prime minister than Margaret Thatcher – and of Gordon Brown, who ran out of time in 2010 but still did well enough to deprive David Cameron of an overall majority.

It is far from clear why the present Labour government has lost public support more extensively and more rapidly than those of the 1940s, 1970s and 2000s, even though economic conditions have been more benign. Almost certainly it is a combination of factors: life is genuinely tough for many people, especially for the young; the public’s patience has worn thin after a decade-and-a-half of flatlining living standards; Labour’s lack of a real plan has been exposed; issues other than the economy – such as immigration and asylum – may now influence voters more than they once did.

One thing seems obvious. There is no guarantee that voters will reassess their view of Labour even if – and this seems unlikely – the economy really starts to motor in 2026. On the contrary, things are likely to get worse before they get better, partly as the result of policy errors by the Bank of England and the Treasury. The Bank has been too slow in cutting interest rates, and last week’s downward move from 4% to 3.75% was a classic case of too little, too late. Rachel Reeves, for her part, made it more expensive to hire workers by raising employers’ national insurance contributions in her 2024 budget.

All governments make mistakes, and they need not be fatal. But Labour is living in a fool’s paradise if it thinks it has plenty of time on its hands to turn things around, even though the next election could be as far away as the summer of 2029 and much can happen in that time.

Yet, the economy ends 2025 with precious little forward momentum. Business confidence is weak, and high street spending by consumers fell in both October and November. The rate cut from the Bank of England was a response to an economy that is not simply sluggish, but in real distress.

So here’s the rub: the government is already phenomenally unpopular. There would be no coming back from a recession – even a relatively short-lived and shallow one.