Go early or postpone election day in the hope that things will look brighter at some point in the future. It is a dilemma that James Callaghan, John Major, Gordon Brown and Theresa May all faced. To that list, now add the name of Rishi Sunak who ends 2023 with a tricky call to make. The Labour party has been on election footing for months, suspecting that the prime minister might call a snap election in the spring. But it was Jeremy Hunt’s announcement in the autumn statement that he was cutting employee national insurance (NI) contributions that really alerted Westminster to the possibility of a May poll. It was not the measure itself that prompted speculation, even though for months the chancellor had appeared to be ruling out personal tax cuts and came to his NI decision late on. Rather, it was the announcement that the change would happen in early January rather than April, as would normally be the case. “They will want to go early if they can,” one Labour source says. “May would be the preferred option but a lot of things have to happen for that to come off.” Historically, the case for clinging on is not strong. Callaghan, Major and Brown did that – and all three lost. Callaghan ran into the 1978-9 winter of discontent, Brown the global financial crisis of 2008. Major never recovered from presiding over the pound’s departure from the exchange rate mechanism on Black Wednesday in September 1992. Hunt says the timing of the NI move has nothing to do with the Conservative party’s election strategy but it certainly leaves the door open for a spring poll should things slot into place. Sunak hopes two months in which inflation has fallen more sharply than expected to stand at 3.9% and the NI cut will persuade voters that the cost of living crisis is over, giving the Conservatives a potential uplift going into what is almost certain to be an election year. Stage 2 of the May election strategy would involve an early budget, perhaps slotted in by the end of February at which Hunt would announce income tax cuts. Parliament would be dissolved shortly afterwards. One factor to be taken into account is the sharp rise in monthly mortgage payments faced by homebuyers. Almost three-quarters of homebuyers (74%) are on fixed-rate home loans, rising to 96% for those who have taken out a mortgage since 2019. These deals have so far limited the impact of the 14 increases in official interest rates from the Bank of England since December 2021 but are now expiring for many borrowers. George Dibb, and associate director for economic policy at the Institute for Public Policy Research thinktank, says 120,000 people a month are coming to the end of fixed-rate mortgages, most of them taken out before Russia’s invasion of Ukraine triggered a fresh upward lurch in inflation. “People who were paying 2% mortgage rates are going to be paying 5% mortgage rates and will feel the cost of living squeeze anew,” he says. Despite the fact that the impact of dearer home loans will affect more and more households over time, Dibb thinks the government will hang on in the hope that interest rates come down as 2024 wears on. After October’s weak growth and the unexpectedly sharp drop in inflation, the financial markets are pricing in five quarter-point cuts from the Bank of England by the end of next year, taking the base rate from 5.25% to 4%. That would still leave them well above the record 2020-21 low of 0.1%. Paul Dales, the chief UK economist at the consultancy Capital Economics, also thinks Sunak will decide against an early election: “The bottom line when it comes to the economy is that it looks better for the government the later it leaves it.” The economy is flatlining and Dales expects it to remain weak over the winter and into the spring. “In the first half of 2024 growth will be soggy and might even be negative. Unemployment may creep up and consumer confidence will be low. Towards the end of the year things will be better. The economy is not going to be off to the races but it will be growing at a faster rate.” Dales says there had been a strong link between consumer confidence and voting intentions stretching back to the 1970 election. When confidence was high, the incumbent government was re-elected; when it was low it lost. The relationship sometimes breaks down. In 1997, the mood was buoyant but Major lost by a landslide. But Dales says there is a possibility consumer confidence – now extremely weak – will have recovered sufficiently in a year’s time to give Sunak a chance of winning. Consumers tend to be happier if their pay packets stretch further and for much of the period since the 2019 election that has not be the case. For the past two years prices have been rising faster than wages and – as the Labour leader, Keir Starmer, points out – this is to be the first parliament in modern times where living standards will have fallen. In recent months, prices have been growing less rapidly than earnings, increasing spending power. But it is likely to take some time for consumers to detect any real improvement in their purchasing power and the pickup in living standards may have come too late to affect the election result. The longer Sunak leaves it the greater the chance of a modest feelgood factor and while that might not be enough to prevent a Labour victory, it might reduce Starmer’s majority. The pollster Peter Kellner thinks the polls – which show Labour with a lead of 20% plus – would need to narrow a lot for the prime minster to risk an early election. “If Labour still has a double-digit poll lead by the middle of March, Sunak’s choice will be accepting defeat in May against the tiny chance of avoiding defeat later. It is probably the case that the longer he hangs on the worse it will be but even if there is only a remote prospect of victory he will hang on,” says Kellner. One risk of waiting until late next year in the hope that something will turn up is that it leaves the government exposed to events, highlighted by Sunak’s problems this week with his Rwanda asylum-seeker plan. There have been two nasty shocks to the economy since 2019 – the global pandemic and the invasion of Ukraine – and the chances of the UK being hit by a third crisis increases the longer that Sunak leaves it. Nick Timothy, one of Theresa May’s special advisers when she plumped for an early election in 2017 and lost the Conservative’s overall majority, says he can see the argument in favour of an early election but thinks it is highly unlikely that Sunak would go for one. “There is chatter about May and I know there is a logic to it. We do badly in the local government elections and struggle on through the summer. But psychologically it is very hard for a prime minister to go for an early election with the polls the way they are,” says Timothy, who is standing as the Conservative candidate for West Suffolk at the next election.