In his masterful biography of Stanley Baldwin, the historian Philip Williamson puts a particular emphasis on paying attention to politicians’ speeches. He argued that ‘in an important sense, politicians are what they speak and publish’ since ‘politics is a public activity and because they need to win support for themselves, their parties, and their causes.’
Williamson’s book was the basis of one of my top essays at university, so I’ve always trusted his judgement. And so, in my first week at ConHome, when the Editor asked for a piece outlining what the then-Chancellor was aiming to do in one fiscal statement or another, I leant on his guidance, and reached for the best available evidence for Sunak’s thinking: his Mais lecture from February.
Hosted by the Bayes Business School and viewed as one of the most influential business lectures in the City, the last few months have made the text seem like an eerie hangover from a previous age. Delivered on the day when both all Covid restrictions in England were abolished and Putin’s tanks rolled into Ukraine, it is the Sunakian version of the Sibylline Books.
With so much else going on, many readers and politicos may have overlooked or forgotten what Southampton’s favourite son said. But one person who has not forgotten – perhaps by refreshing himself with it via our post – is his replacement (but two) at Number 11. Jeremy Hunt referenced the lecture in the Autumn Statement, which raises the question of how closely the two align.
The central feature of Sunak’s lecture is a refreshingly (and depressingly) familiar problem: our sluggish growth. The stock responses to this of both the left and the right due his ire. That first was that more state spending leads to economic growth; the second, that tax cuts automatically pay for themselves.
To go back now and see Sunak put to the sword those Laffer-enthusiasts who give only a “partial account” of the approach of Margaret Thatcher and Nigel Lawson gives one déjà vu. It is the ur-text, the Epic of Gilgamesh to all my anti-Trussonomics screeds. Sunak, like Thatcher, believes in fiscal responsibility. For tax cuts to be financed without more borrowing, spending must shrink, or growth must rise.
Hence why Sunak devotes his lecture to making the case for what he calls a new “culture of enterprise”. This is not an argument for the state to play a bigger role in the economy. Post-Covid, Sunak wants the state to be smaller. Instead, it aims to encourage private enterprises to tackle what our now-PM sees as their biggest failing compared to our international competitors: an unwillingness to invest.
He had his stats. Capital investment by UK businesses averages just 10 per cent of GDP, considerably lower than the OECD average. Just 18 per cent of 25–64-year-olds hold vocational qualifications, a third lower than the OECD average. Self-financed business investment in research and development (R&D) is less than half – you guessed it – the OECD average. A problematic pattern emerges.
Sunak’s solution was “three priorities to deliver higher productivity”: capital, people, and ideas. With each, “what government does is far less important than creating the conditions for private businesses and individuals to thrive”. This leads him onto arguing for the need to make our tax system more generous towards capital investment, to improve lifelong-learning, and to incentivise R&D spending.
Nine months, two leadership elections, and one lettuce later, and Sunak finds himself bumped up from Second Lord of the Treasury to the First. The cost for inheriting Larry the Cat under the circumstances in which he did was to find himself partnered with a Chancellor chosen by his predecessor. Jeremy Hunt was a supporter, but not necessarily Sunak’s first choice.
Moreover, the economic conditions the two face were sub-optimal. Sunak was ahead of the curve in identifying the inflation hurtling towards us at a point when The Financial Times were still in denial. But the ongoing global disruption, pressure for quantitative tightening, and Truss-premium placed on appeasing the markets mean his room for manoeuvre is even more constrained now than in February.
In this sense, the Prime Minister and Chancellor resemble Theresa May and Philip Hammond more than David Cameron and George Osborne or Liz Truss and Kwasi Kwarteng. They are allies but not soulmates, inheriting a perilous situation with similar views but without any long-gestating common project on which they wish to embark.
Viewing Hunt’s Autumn Statement in the light of Sunak’s Mais lecture thus provides an opportunity to understand the extent to which the Old Wykehamist and the Old Carthusian have been able marry their instincts to the difficult task they face. The answer is surprisingly well, but for a reason that would not immediately spring to mind.
The first half of the Statement accounted for the grim but long-heralded news about which taxes would be raised today and which spending cuts would be implemented tomorrow. This was Sunakian in that it involved a lot of hard-headed talk about fiscal responsibility, with the added zing that it was the grim response to a grubby situation he warned about months ago.
But Hunt’s speech was more than just an “I told you so” from his new boss with a £55 billion price tag. The second half of the Statement is where he showed he had done his reading. Capital, people, ideas – the “Get Brexit Done” of post-Johnson and post-Truss – and hopefully pre-growth – politics. Being technical and dry topics, they slotted well into a Statement that dared to be dour.
A hat was tipped to each. Business R&D tax reliefs will be reformed, with SMEs relief reduced in order to cut fraud. Hunt pledged the largest ever increase in R&D spending. Sir Michael Barber is to be brought in to advise on reforming and improving skills, which shared in a broader education funding boost. Hunt borrowed Sunak’s line about wanting to make Britain the new Silicon Valley.
Where the Autumn Statement departed from the Mais lecture – in ways other than those mandated by the bond markets – was in Hunt’s sprinkling of his own preoccupations. We received another trifecta: energy, infrastructure, and innovation. And Hunt name-checked his own book, in the interests not of sales, but in highlighting extra funding being shovelled into the NHS winter Götterdämmerung.
In this, Hunt showed what he adds to Sunakism. Undoubtedly, Sunak had the best economic mind of any Chancellor since Geoffrey Howe or Nigel Lawson. But, like them, the economics came before the politics. Unlike with Gordon Brown or Osborne, the primary focus was not on moving next door. He was an economist first, and a politician second.
In the months since his Mais lecture, Sunak’s career stalled with the mess around his wife’s taxes. His first leadership bid failed to win over members, partially down to his unwillingness to sugar-coat hard economic truths. The implosion of Trussonomics meant MPs elevated him to Downing Street because of his role as a fiscal Cassandra. But worries about his political naivety remain.
Hunt, as a Remain supporter and two-time leadership election loser, is not necessarily the first person one would seek out when thinking about winning elections. But he was plotting to become President of OUCA at Oxford whilst Sunak ignored politics and hung out with the finance society. As with Cameron and Osborne, he is the more politically-minded of the pair.
If Sunak is Baldwin without the pipe – a reassuring ex-Chancellor who helped defenestrate a predecessor – then Hunt is Neville Chamberlain. Not because of any clichés about appeasement, but because, as an ex-Health Minister who finds himself at the Treasury, he knows how central public services are to our politics and finances. Between the two of them, they have the economics and politics covered,
Hunt’s priorities thus marry well with Sunak Stanford-hewn vision of tech bros, innovation, and more investment outlined in his Mais lecture. The pair will hope that last week’s harsh medicine will mean a sooner-than-expected recovery – and a swift return for that currently-cancelled cut to the basic rate of income tax. Reviving Baldwin’s mantra of ‘Safety First’ for 2024 might be no bad thing.