Does sacking the manager improve results? The evidence from this Premier League season is mixed. Everton, Bournemouth and Wolves all avoided the drop after ringing the changes. But all three relegated sides also fired their manager, Leeds and Southampton more than once.
Another team that has changed leader twice in recent times is the Conservative Party. And while governing philosophy has certainly changed, the results continue to be mixed.
Today, two-year gilt yields hit 4.5 per cent, only slightly below their September 2022 peak. Meanwhile, the number of mortgage deals on the market has shrunk by more than 370 since the beginning of last week, with some providers pulling their entire fixed-rate range. The last time this happened, the chancellor was sacked and days later the prime minister was effectively given her marching orders by (1922 Committee) chairman Sir Graham Brady.
And for a while, this seemed to work. The appointment of Jeremy Hunt to the Treasury, the U-turn on practically all the tax cuts announced in the ‘mini-Budget’ and the unopposed election of fiscal hawk Rishi Sunak calmed the markets. Borrowing costs fell, mortgage products returned and everyone breathed a sigh of relief – the grownups were back in charge. Except, here we are again.
The main culprit this time isn’t unfunded tax cuts or a missing OBR forecast, but interest rates. The markets now expect that rates could rise as high as 5.5 per cent, perhaps even 6 per cent by the end of this year. For context, at the start of 2023, it was thought they might peak at 4.5 per cent.
The cause of this is of course inflation. Although the headline CPI rate fell sharply last month, core inflation, which strips out more volatile prices such as fuel and food, actually rose to a 31-year high. This indicates that underlying price pressures may be more entrenched than initially thought.
To this cauldron of discontent we must add one further ingredient – time lags. According to the Resolution Foundation think tank, only a third of homeowners have thus far been impacted by higher rates, hitherto protected by their fixed mortgages. But those fixes are coming to an end. In other words, there is more pain to come.
Indeed, figures from the Office for National Statistics earlier this year suggested that more than 1.4m households will come off their fixed rate in 2023, and more than half of those (57 per cent) were previously fixed at a rate of less than 2 per cent. Today, you can expect to pay average rates of 5.38 per cent for two-year deals and 5.05 per cent for five-year fixes. That would add roughly £6,500 to the annual payments on a typical London £350,000 mortgage.
This does not necessarily portend a repeat of the repossessions seen in the 1990s and following the 2008 crash. Given the substantial house price growth of the last few years, there are likely to be fewer distressed sellers while buyers should have faced stringent stress tests when taking out their loans in the first place. Furthermore, a third own their property outright.
Still, all this paints a pretty bleak picture for the wider economy. People will prioritise ensuring food on the table and a roof over their heads before all else. But given soaring mortgage repayments, rents and other inflationary pressures, this does not leave much left over for the sort of discretionary spending that keeps an economy purring along. The continuation of a flatlining economy alongside falling living standards seems inevitable.
The Tories have tried changing the manager, most recently last autumn. It worked for a while, but economic performance has reverted to the mean. And it remains unclear what tools the prime minister possesses to avoid the political equivalent of relegation in 2024.
In the comment pages, Nimco Ali reflects on the black children being shot in broad daylight and says she’s had enough. Anne McElvoy suggests ‘Hail Mary’ Sunak is starting to look more desperate than masterly. While after an unexpectedly expensive evening, Simon English wonders who can afford a night out at the theatre any more?
And finally, a south London woman has spoken of her frustration over tourists continually turning up at her door after her home was incorrectly listed as a Booking.com destination.
