Rishi Sunak’s story as Prime Minister divides into three chapters. First came five pledges – founded on the plausible belief that the British people, dismayed by the Boris Johnson and Liz Truss premierships, were unwilling to give any new Tory leader a hearing. So he took the advice of Conservative strategists, and chose to pursue what he said were voters’ priorities rather than make a case for his own.
He claims success on his first target, halving inflation – though the year is not yet complete and much counter-inflation policy is in the hands of the Bank of England. And he moved forward on his last – stopping the boats – before being sent reeling backwards. Crossings are down by a third since last year, but the Supreme Court has blasted a hole through his Rwanda policy.
He has not hit his target of cutting waiting lists, though he may do next spring. He committed to getting the economy growing, and there has been no recession on his watch (though there may yet be). He also promised to reduce national debt, presumably as a proportion of GDP, but it is still rising, and will only fall within five years if fuel duty is raised next year.
You can argue the detail back and forth, but voters haven’t been convinced. On the eve of the Conservative Party Conference, Politico’s poll of polls put Labour’s lead at 17 points.
At which point, the Prime Minister’s second chapter began – though its essence was prefigured last spring when Dominic Raab was replaced as Justice Secretary by Alex Chalk. The leitmotif of this stage in Sunak’s story was for him to focus on policies that interest him and promote people he likes.
The former has involved pruning HS2, banning smoking over time, A level reform and NHS workforce change. Important though all these are, none are central to voters. The latter included promoting Claire Coutinho, and others not identified with the right of the Parliamentary Party, bringing back David Cameron as Foreign Secretary and sacking Suella Braverman from the Home Office.
Again, you can argue for as long as you want about whether the Prime Minister is left of Tory centre himself, or whether the people he likes are, or whether both statements are true. But the heart of the matter is that, last September, he had five big set-pieces left pre-election: the conference, the King’s Speech, a reshuffle, the Autumn Statement and, presumably, a spring Budget.
Three of those five had come and gone by the start of this week, and Labour’s lead in Politico’s poll had stretched to 20 points. Sunak’s attempt to pitch himself as a candidate of change had not succeeded. Which brings us to Monday’s soft relaunch, with its five new commitments, and Hunt’s statement yesterday.
The position in a nutshell is that the Office for Budget Responsibility now expects inflation to hit its two per cent target in 2025, the deficit is about three per cent of GDP, and debt is knocking around at over 90 per cent of GDP. On the one hand, inflation has gifted Jeremy Hunt better than anticipated tax revenues; on the other, it has also raised interest rate payments on government debt.
So the Chancellor could have used what the Resolution Foundation calls his “near £90 billion of fiscal good news” exclusively to further reduce government borrowing and debt, and continue to say that any tax cuts worth the name would merely stoke inflation – which is the view he was spelling out as recently as October. Or he could have used the windfall to relieve the pressure on public spending growth.
Instead, he delivered some £20 billion worth of tax cuts, including a 2p reduction to the main rate of employee National Insurance, along with a 1p cut for self-employed workers and the abolition of Class 2 National Insurance altogether. One might think that with anaemic growth forecasts and inflation apparently subsiding, Hunt and Sunak have decided to switch their focus from halting the latter to boosting the former.
So it seems and so it is. For elsewhere, the Chancellor set out plans for full expensing, welfare reform, speeding up infrastructure planning, manufacturing investment and pension reform. As ever, the demons will be in the detail (and watch for reannouncements), but this platform looks sober and solid, though late in the Parliament and with gaps, as ever, where housing and childcare reform ought to be.
But the thrust of Hunt’s statement was not so much economic as political. By opting for spending restraint – relatively speaking – and tax cuts, he and Sunak were, in classic governmental fashion, setting the baseline. Would Labour seek to spend more in government, on top of the £28 billion Hunt twitted Rachel Reeves with today? If so, which taxes would she raise?
“In today’s autumn statement for growth our choice is not big government, high spending and high tax, because we know that that leads to less growth, not more. Instead, we reduce debt, cut taxes and reward work,” the Chancellor told the Commons. You may protest that this is all rot – pointing out that public spending and the tax burden are at record highs.
Indeed, the £10 billion of personal tax cuts are more than offset by the £45 billion of previously announced national insurance and income tax rises. Reeves had little to say today other than to argue that the Conservatives have wasted 14 years. But the British people may not require her and Sir Keir Starmer to say all that much more.
After all, the 3.5 per cent fall between the last election and the coming one is the largest reduction in real living standards in modern times. Covid, war, inflation, Johnson’s ousting, Truss’s fall, Sunak’s defeat in the Supreme Court over the Rwanda scheme: no wonder the British people are poised, if the polls are right, to vote for change.
Most general elections boil down to “time for a change” versus “don’t throw it all away” – or, in the absence of all that much to throw away, “better the devil you know”. The Prime Minister would argue that he is all about change, citing much of today’s statement as evidence. But the truth is that the moment for him to try and define himself as the candidate of change has passed.
Monday’s speech and today’s announcement show him choosing conventional ground for the next election. Essentially, he will present himself as the candidate of a smaller state, sensible government, Tory continuity and lower taxes – well, smaller and lower than Labour’s alternative, at any rate. And since Hunt may find no money for further tax cuts next spring, the option of a May general election is opening up.