RISHI Sunak is giving the impression of a man in an ever-greater hurry to add to the huge economic and fiscal policy blunders which have characterised the period since the Conservatives came to power in 2010.
Crucially, at a time when his focus should be on securing economic recovery, which is far from assured and must be nurtured, the Chancellor was instead last week banging on about “Conservative values”. His tone sounded a lot like that of David Cameron and George Osborne, after a 2010 general election victory following which they seemed to do their best to choke off growth with their utterly ill-judged, as well as savage and repugnant, austerity programme.
It was difficult to ascertain – when listening to Mr Sunak’s speech last week to the Conservative Party’s annual conference in Manchester – which was the greater of two emotions evoked by his utterings.
There was of course the alarm created by Mr Sunak’s apparent obsession and crucially seeming impatience about “fixing” the public finances. This agitation appeared to incorporate a staggering assumption that moving swiftly on this front would not damage recovery and thus prove counter-productive through a detrimental impact on growth, tax revenues and unemployment benefits. Of course, the Tories still seem to believe fiscal tightening means an automatic improvement in the public finances, even though their track record since 2010 surely shows this is absolutely not the case.
The other emotion evoked by the speech was extreme irritation over Mr Sunak peddling and spinning that tired old Tory yarn about the Conservatives having done a good job in terms of the public finances since coming to power in 2010.
This yarn was a key feature of his speech.
Mr Sunak told the party faithful: “And there can be no prosperous future unless it is built on the foundation of strong public finances. I have to be blunt with you – our recovery comes with a cost. Our national debt is almost a hundred per cent of GDP so we need to fix our public finances because strong public finances don’t happen by accident – they are a deliberate choice, they are a legacy for future generations and they safeguard against future threats. I am grateful – we should all be grateful – to my predecessors and their 10 years of sound Conservative management of our economy. They believed in fiscal responsibility, I believe in fiscal responsibility, and everyone in this hall does too.”
So there it is: a seeming assumption that recovery will happen by accident and not be derailed by an at-best extremely premature focus on fiscal tightening.
It is worth looking at the cold numbers to examine whether there was actually a decade of “sound Conservative management of our economy”, or not.
The cold figures surely appear at odds with Mr Sunak’s interpretation of the situation?
The Conservatives propelled the UK’s public sector net debt from £1 trillion in 2010 to £1.8 trillion, just ahead of the coronavirus pandemic hitting.
Mr Sunak told the Conservative Party conference: “And whilst I know tax rises are unpopular, some will even say un-Conservative, I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt. Anyone who tells you that you can borrow more today and tomorrow will simply sort itself out just doesn’t care about the future.
“So, yes, I want tax cuts but in order to do that our public finances must be put back on a sustainable footing. Now Labour’s track record on the public finances speaks for itself. Since 2010, we’ve had five Labour leaders, seven shadow chancellors and innumerable spending pledges, and in all that time they still haven’t got the message: the British people won’t trust a party that isn’t serious with their money and that’s why they vote Conservative.”
A few points are worth making here. Surely Mr Sunak’s comment about Labour’s track record on the public finances speaking for itself is somewhat bizarre. It is, as the Chancellor alludes to himself, the Tories who have been in power since 2010.
His remarks around “soaring debt” and “tax cuts” are also interesting.
After all, as can be seen from the numbers, soaring debt is exactly what the Tories delivered, and that was before the pandemic wrought its havoc.
And they delivered this ballooning of debt in large part through huge policy blunders.
Austerity proved to be exactly not what the economy needed back in 2010 or in the years that followed, as shown by the Tories’ abject failure to deliver the economic recovery they promised with a policy mix that was hugely damaging to both the economy and society. Remember former chancellor Mr Osborne’s promise, in his March 2011 Budget, of “a Britain carried aloft by the march of the makers”. This did not materialise.
Of course, the UK economy’s already very significant problems have also been compounded greatly in more recent years by the Conservatives’ Brexit folly.
Now the “makers” are having to fight against huge headwinds in the form of a supply-chain fiasco caused in large part by labour shortages and an associated surge in costs. Manufacturers, and many other businesses across a raft of sectors, also face their own major challenges in finding people to fill key jobs, following the Conservatives’ post-Brexit clampdown on immigration from European Union countries.
In terms of Mr Sunak’s reference to “tax cuts”, it is also worth noting that, while the savage austerity programme of Messrs Cameron and Osborne hammered households dependent on benefits, companies did gain from a dramatic reduction in corporation tax.
Mr Sunak, in a sensible move unveiled in his March Budget, is reversing a small part of this massive cut. This planned partial reversal of the huge reduction which was delivered in stages by the Tories will not damage the UK’s position as a country with relatively low corporation tax in a global context.
However, Prime Minister Boris Johnson last month unveiled plans to hike national insurance contributions for hard-pressed employers and individuals, a move rightly characterised as a tax on jobs.
This will hamper greatly the spending capacity of millions of ordinary people, thus weighing heavily on recovery. The national insurance hike has been dressed up by the Johnson administration as a health and social care levy but in essence it is a tax grab, and one likely to cause significant damage to the economy.
Mr Sunak sometimes gives the impression of a man who thinks the main challenges in trying to rescue the economy from the effects of the coronavirus pandemic might be behind him, and his fixation last week with the public finances adds to this picture.
Talking of his “whatever it takes” press conferences in his early days as Chancellor at the onset of the pandemic, he declared last week: “It was daunting to face such a challenge in my first days in office.”
But the challenges ahead, for households and businesses alike, are truly daunting. Hopefully deep down Mr Sunak realises this but it is far from clear that he does.
Mr Sunak talked at the Conservative Party conference about there having been “occasions when it really did feel like the world was collapsing” and in those moments falling back on his family, colleagues, Treasury team and Mr Johnson.
He added: “But the other thing I fell back on is something we all have in this room – our values, our Conservative values. I believe in some straightforward things. I believe that mindless ideology is dangerous. I’m a pragmatist. I care about what works, not about the purity of any dogma.
“I believe in fiscal responsibility. Just borrowing more money and stacking up bills for future generations to pay is not just economically irresponsible, it is immoral…because it’s not the state’s money, it is your money.”
Mr Sunak is due to unveil a spending review and Budget on October 27.
His speech last week provides plenty of reason to be alarmed that the Chancellor and his Cabinet colleagues will be simply unable to resist continuing the ideologically based, massive Tory mistakes of recent years.