Budget Reaction: No sign of hope for Sunak or an imminent election

• Budget fails to generate positivity

• Spring election looks very unlikely

• Sunak's position could deteriorate further

Jeremy Hunt yesterday delivered the final budget before the general election but traders expecting a reaction on Betfair markets will be largely disappointed. The odds for Most Seats 1.141/7, Labour Majority 1.241/4 and 1.784/5 about Over 200 Total Conservative Losses were basically unmoved.

Bettors move against spring election

The only market move of note came in our Election Date markets. There had been plenty of chatter about this Budget firing the starting gun for a spring election. However, in the absence of new headline giveaways, April-June drifted from 4.67/2 to 6.611/2, and the favourite, Oct-Dec, hardened from 1.422/5 to 1.331/3.

Were a May election the plan, Rishi Sunak would need to announce it before the dissolution of Parliament on March 26th. There seems no expectation of that, and a further clue can be found in this analysis of party spending on digital ads. The authors do not see signals.

The latest possible date, January 2025, shortened a little to 11.010/1 but this news that there will be no Autumn Statement appears to scupper that theory.

Nugget for election watchers: budget red book states there will not be another spending review before next election pic.twitter.com/dO6Va57Noo

-- Pippa Crerar (@PippaCrerar) March 6, 2024

Thus, that short odds favourite appears to be a certainty. In our market broken down by month, November is favourite at 2.486/4, with October at 3.55/2 and December at 14.013/1.

Trump's re-election campaign looms large

I wonder to what extent the US Election will feature in Sunak's calculations. Many Tory MPs have already come out for Donald Trump and that could become extremely awkward, given his unpopularity in the UK and the nature of his campaign.

That race will be framed as democracy versus dictatorship or even fascism. It may well turn violent and history tells us Trump probably won't agree to accept the result beforehand, or after if he loses.

Unlike Liz Truss or Boris Johnson, who openly back Trump, I don't believe Sunak will want to revel in the association. If he wanted to be seen as a far-Right populist, he wouldn't have sacked Lee Anderson for his Islamophobic attack on Sadiq Khan, but doubled down. For me, this is a reason to swerve the November option.

The value may be December, at least from a trading perspective. Odds of 14.013/1 feel likely to shorten up. If then, Sunak can bide his time before any utterances on the US situation.

Furthermore, the later in winter, the easier to depress turnout. That I believe would favour the Tories, whose base are older and more reliable voters. In December 2019, the Tories secured their best election result in decades.

Sunak critics won't be won over or silenced

Relying on low turnout may smack of desperation but that is precisely the position. The Tories are at their lowest point in the polls ever and the numbers look entrenched. It seems unlikely many target voters will be turned by this budget. Sunak's task is to merely avoid obliteration by bringing some of their 2019 defectors back onside. Check out the damning reaction of Sky's focus group.

Sky News / YouGov Voters Panel

What do 2019 Tory voters - the key group - make of the Budget

Film by @TomLarkinSkyhttps://t.co/7bmUe2VSF3

-- Sam Coates Sky (@SamCoatesSky) March 7, 2024

Indeed, it is striking how little positivity Hunt managed to generate, even from supportive media. They expected, even demanded, tax cuts or something exciting, a rabbit out of the hat, which didn't materialise. Overall, taxes continue to rise. Usually the budget narrative worsens for the government as the week goes on, as the details are scrutinised.

Frankly December feels a long way off for Sunak. His internal enemies will be emboldened and are bound to bemoan the lack of what they see as a conservative agenda of aggressive tax cuts.

Defectors to Reform have little incentive to return to the Tory fold, and they will enjoy stressing the differences between their right wing agenda and Jeremy Hunt (formerly an ardent Remainer).

Local election losses could be catastrophic

Sunak is on course to suffer another electoral massacre at May's local elections - these council seats were last contested when the government was enjoying a 'vaccine bounce' - plus at least one more by-election loss. Despite no signal from the betting or serious media speculation but I remain of the view that he could be removed, or destabilised by a Confidence Vote, before the election.

The latter is available at odds of 6.611/2. After those May elections, I expect to see the speculation ramp up and odds to move.

If one were looking for a positive for the Tories, it would be that Hunt's tactics will box in Labour. By stealing their plan to raise money by taxing non doms, Keir Starmer's timidity is laid bare. It is going to be very hard for Labour to drum up enthusiasm. Again, there are implications for depressed turnout.

The bigger picture is a grim economic situation. Five weeks ago, the IMF - the international guardian of fiscal responsibility - warned the government against tax cuts. A direct warning to the Tories that a repeat of Trussonomics would not receive a favorable reception on international markets.

Labour almost immediately rewrote their spending plans, carrying real political risk, by scrapping a pledge of £28BN in green investments. Both Tory and Labour hands are tied and those restrictions will shape the election manifestos. Bad news for all of us but one has to think, at this point in the cycle, the damage to the government will supercede any to the opposition.

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