Can Kemi Badenoch woo the City?
The Conservative leader sits down with CityAM’s City editor, Simon Hunt.
The Labour government is gearing up for an anniversary. On 5 July, the party will have completed its first full year in office since it was kicked out in 2010.
Having won last summer’s general election with a thumping majority of 411, Sir Keir Starmer’s accession to Downing Street was supposed to usher in a new era of stable, transformative government, making big long-term decisions.
But days before the anniversary, the prime minister is instead braced for his third major U-turn since taking office – this time on his welfare reforms bill, after more than 100 of his own backbenchers signalled they’d be prepared to vote it down.
Starmer has his share of regrets over decisions taken in his first year in Number 10. He wishes he hadn’t referred to an “island of strangers” in a speech on curbs to immigration, which many saw as an echo of a speech decades earlier by Enoch Powell. And he regrets the tone of his “things will get worse before they get better” speech in the Downing Street garden last summer, which spawned a pervasive malaise among the electorate – and business – that has proved hard to shake off.
In the past twelve months, Labour has presided over tax hikes, rising unemployment and cuts to growth forecasts. The collapse or near-collapse of several plants and manufacturing sites, such as British Steel in Scunthorpe and a number of chemical sites, has blown a hole in the government’s ambitious industrial strategy plans. And the latest U-turn on welfare will add another few billion to public spending, raising the odds of more tax hikes in the autumn to a near certainty.
Taken together, it is no surprise Labour’s start in office has seen public support collapse from 37 per cent prior to the election to a paltry 23 per cent today.
What is more surprising is that opposition leader Kemi Badenoch has not been a beneficiary. The Conservatives’ support has also slipped from around 25 per cent at the start of the year to just 18 per cent today, according to recent polls.
I ask Badenoch how she feels about her own performance in opposition. She pauses, and takes a big swig of coke from a bottle produced by aides, before we get to her first answer.
“We are doing the day job in parliament of opposition well,” she tells me. “We’re the ones that are there holding the government to account.
“Where it’s harder is out there in the country where people are still angry about the 14 years of Conservative government. Rebuilding trust is the key job right now – we need people to trust the Conservatives, to believe in us, to see as the ones who are their champions.”
Moving on from Johnson and Truss
An upcoming Tory anniversary helps explain Badenoch’s uphill battle. On July 7, it will be three years since Boris Johnson resigned as prime minister after the excruciating “partygate” saga. The resignation was followed soon after by the short but eventful Liz Truss premiership, during which bond markets reeled from the unfunded spending pledges in her ironically-named “mini budget”, moves which triggered her speedy defenestration.
Those two predecessors dealt Badenoch the worst possible cards when she took over as party leader in November last year. She insists fiscal credibility, and relations with business, will be the bedrock of restoring the party’s support.
“The Conservative party is the natural party of business,” Badenoch says.
“And I’m sorry if at any time over the last 14 years we did not seem like that, but they can see that we’re the only party that is talking about fiscal responsibility and trying to get spending down rather than just increasing it a little bit more slowly.”
Starmer wasn’t given a stellar inheritance either, when he became leader of the Labour party. The 2019 general election saw his party suffer a crippling defeat. Starmer acted swiftly to redirect the party, and would soon oust his predecessor Jeremy Corbyn from the party over his response to antisemitism allegations.
It was an unprecedented move, but one which put a lid on the more extreme wing of the party and allowed Starmer to reset relations with the public. Could it be time for Badenoch to make a similar move and let go of Liz? Truss had hardly showered herself with glory since leaving office, and is veering ever-nearer to the fruitcake-end of the right.
“Liz Truss is not in Parliament any more. What I’m about is showing what I’m going to do. That’s what’s going to rebuild trust,” Badenoch says.
If she’s not even in Parliament, wouldn’t that make it easier to lose Liz, I protest. Wouldn’t that be the best way to reassure the City, the markets, that you get it?
“That’s not what people in the City have told me. I have had many dinners, many speeches, many conversations with lots of people in the City – a lot of them are part of our donor base – not a single one has asked that. The only people who ask about it are journalists.”
That’s me told. Speaking of bond markets, gilt yields are back to Liz-era levels. Why?
“They’re higher than they were during that period,” Kemi corrects me.
“She had problems with LDI, there was a lot of leverage that was hidden in the market. That’s not Labour’s excuse right now. They have created the situation.
“Gilt yields are high because people do not have a lot of faith in how they’re running the economy.
“The reason why is because they looked at the choices they made as soon as they came in. They talked the economy down, they made up a fictitious black hole which they’ve now created.
“There is now a real black hole, Rachel Reeves has got no fiscal headroom, they’re now coming back for more tax rises.”
Reform dominates the headlines on policy
Badenoch’s diagnosis doesn’t stray far from that of the City. But she has stopped short of offering an antidote.
That role has been left to insurgents Reform, who have pumped out policies at pace over the past few months. Some, including on a new tax status for non-doms and the creation of a “Bitcoin reserve”, stretch credulity. Analysts have even warned of a sterling crisis, should Reform’s manifesto, in current form, ever be implemented.
But in the absence of policies from the Conservatives, the ideas from Nigel Farage’s startup party are turning heads, and Reform are soaring in the polls. Does that not worry Kemi?
“One of the things I have been very consistent on is we need to distinguish between announcements and policies. An announcement is just an expression of a wish of something that you want to do. A policy is explaining how we are going to do it.”
Distinctions aside, what fiscal policies – or announcements – do the Conservatives have to differentiate themselves from Labour? Kemi has so far come up with little to grab headlines.
“We are looking at everything,” Badenoch says. “Our policy renewal programme is trying to get us to a place where we refresh the whole of government and the whole system. That requires a lot of work.”
In this respect, Badenoch is borrowing from the playbook of Starmer, who as party leader held off on major policy commitments until much nearer the election.
But with Reform breathing down her neck, does Kemi have the luxury of time? She is also up against the foibles of the parliamentary Conservative party, and its favourite pastime, ousting the leader.
Since 2015, the Tories have had more leaders than most Premier League Clubs have had managers – quite the feat. And her former leadership opponent, Robert Jenrick, is waiting in the wings, quietly building up a team – and a profile – ready, some say, to seize the top job at any moment.
Building support from business
A former Coutts manager, Badenoch’s fondness for the City, the Conservatives’ natural base, will help keep her adversaries at bay. Her two right hand men – shadow chancellor Mel Stride and shadow business secretary Andrew Griffith, both veterans of the business world, are a nod to her push for economic credibility. She can only hope that that fondness is reciprocated.
“I used to work in the City. I had a long career working in banking,” Badenoch says.
“We need to remind ourselves that we are an 80 per cent services economy. If you listen to Labour you would think we’re just manufacturing goods and just exporting them. But the services economy is what’s really paying for quite a lot and we need to make sure we support that and financial services is absolutely critical for that.
“We understand the services economy. You look at Mel Stride, you look at Andrew Griffith, they were people who started businesses, sold businesses.
“We know business, we get it, we come from a private sector background and we are the ones who are going to make sure that we deliver what they need to see. We are their champions.”