“As sure as night follows day, you name it – they’ll tax it”
Rishi Sunak doesn’t get much mention on ConservativeHome these days. I wrote a review of him when he stepped down as leader that might have been viewed as over generous at the time, but I think has fulfilled my prediction that history would be kinder to his time as Prime Minister than it was in 2024.
At least he stuck around as he promised, unlike the integrity-charlatan that replaced him who has cut and run, as he promised not to, and forced a by-election in Holborn and St Pancras.
I will never support Sunak’s decision to go early to the country (another concept returning to the present) but I’d happily suggest he was a better PM for all the problems than Kier Starmer ever was.
But there’s a feeling that’s been building, that on certain specific issues, especially those voiced during and after that horrible General Election defeat, that even those who think ‘even if Rishi wasn’t Right – he was right’
You name it they’ll tax it. He directed this at Starmer and Reeves and the first phase of this stunningly poor Labour Government, but as Burnham, Haigh and Healey are demonstrating the ‘they’ was ultimately Labour.
The Conservatives are very busy behind the scenes looking at the coming Budget, which given Conference is going to be more important this year than last year’s make-or-break performance for Kemi Badenoch, is interesting in itself.
The Tories are convinced that the ‘new’ Government – same stuff different wrapper – has no better concept of the financial trouble this country is in, than its previous incarnation with Rachel Reeves and her made up “£22bn black hole”, and has slowly discovered a £10bn real one she gifted them.
Money really is too tight to mention. We may not be at cliff’s edge but the Tories can see it, and if they thought Burnham and Healey can’t see it, it turns out they may not have even known it was there.
The FT’s George Parker and Sam Fleming had a very worrying snippet this week that should have caught more attention.
“Healey discovered he would become Chancellor just days before he entered the Treasury, giving him no time for the customary meetings with officials to see the state of the government’s books ahead of taking power.
“I don’t think John Healey knew; I don’t think Andy knew” says a senior Labour official. “Until you get the proper briefings you can only know so much. John was not in access talks with the Treasury until it was way too late”
Quite apart from signalling that thanks to a previous Labour Chancellor, Gordon Brown the Treasury has way too much control and secrecy about that, how on earth could the pair of them not know just how bad things are?!
Debt to GDP is in dangerous waters, and whilst Burnham dislikes the concept of ‘being in hock to the bond markets’ – the hard reality is that he is. Those markets haven’t had treasury briefings either and still know exactly how fragile and unsustainable our position is.
Quite apart from Healey and Burnham ‘failing to rule out tax rises’ when asked about the Budget – and it’s central conundrum for both: where will the money come from – Healey made a speech in which the Conservatives hoped to glean answers, ones they are increasingly sure they’ve guessed.
However, with bond yields where they are, and – let’s admit it – global inflationary travel, as one very senior Tory put it at a dinner this week:
“You don’t send your Chancellor out to make a speech when he has nothing to say. Worse don’t send your Chancellor out with nothing to say on growth. And worst of all never send your Chancellor out to make a speech with nothing to say on growth when the markets are as jumpy as they are right now”
If the government’s economic team were clueless as to the state of things, one reason for their reticence to say anything, might be that what they have to say is not what the markets, the Opposition and increasingly voters want to hear.
It’s Labour’s backbenchers who seem the people Burnham most wants to please. And that is best done, by avoiding spending cuts. Leaving more borrowing and debt, and/or tax rises.
Andy Haldane former chief economist at the Bank of England and occasional source of advice to Burnham told Andrew Marr on LBC when asked if he thought Labour would really cut any areas of spending:
“Look, any step in that direction would cost you something in political capital with the backbenchers, and beyond possibly. Ultimately it’s only by taking actions that come with a political cost that you convince financial markets that you are serious. The fiscal Achilles’ heel of this government thus far has been it’s unwillingness and/or inability to cut public spending. Within financial markets we’ve gone from the cautious optimism of the summer months to the studied scepticism of September…the market now suspects that this is a traditional tax and spend socialist government with better TikTok”
Well the markets and Haldane are right. There is a direction of travel, disastrous in the view of right of centre circles, that Labour’s set a course to go back to the seventies for Britain’s future.
Yes, there has been a Trade Unionist director of the Bank of England for nearly eighty years, but nobody seems to question why that should be particularly a thing. Window dressing for a breadth of views? Or will Paul Nowak, now appointed in a long line of appointments, even under the Conservatives, exert more say when the Chancellor is of a similar mind set, and both have a fondness for an era where such individuals had huge sway.
Burnham has blamed Britain’s economic woes, bypassing all the real reasons, on Margaret Thatcher, ergo he wants Britain more like 1977, than 1997.
Burnham was seven years old then. Louise Haigh his right hand lefty was actually born once month after Thatcher’s third election victory. It’s hard to see this as anymore than clouded political nostalgia divorced from the awful reality.
Increasingly worried where this economic path will lead us, in the heart of Conservative planning is a crude if simple logic to what they think they will need to do to bring about the ‘economic revolution’ Badenoch and Griffith have been talking about. Andrew Griffith is making his first speech as Shadow Chancellor this morning.
As one very senior shadow cabinet member put it:
“If Labour’s offer is a return to the seventies, our solution will have to be a dose of the eighties”
They then made a point we’ve been highlighting here for a few weeks. If Burnham and Healey can’t see a way out within the fiscal rules, with borrowing costs where they are, looking for tax rises, and utterly boxed in on spending cuts – indeed demands for higher spending from their own side – then there is one option they might need to take.
Go to the country early, and say ‘this is what we want to do, do you back us to do it’
The answer to that might be the equivalent of a Lemming-dash over the cliff edge Labour wants to pretend isn’t there.