Insanity is said to be doing the same thing over and over again and expecting different results. If that is the case, then Jeremy Hunt resorting to arguments that an economy can cut its way to growth may well be judged to be mad. Mr Hunt insisted during his hour-long budget speech that his policies were working when they are not. Is it any surprise voters aren’t listening?
The audience for Mr Hunt’s austerity-infused oration in parliament was behind him. If he had voters in mind, the chancellor would have made good on Rishi Sunak’s 2022 pledge for crowd-pleasing income tax cuts. Instead, he sought to nullify the arguments of backbench critics by reducing national insurance by 2p, and playing to the gallery by quoting a discredited rightwing economic theory – the Laffer curve – that says lower tax rates for the rich will lead to higher tax revenues.
This might get some favourable headlines in Tory-supporting newspapers for a day. But his policy of freezing tax thresholds quickly exposed the chancellor’s intention of raising taxes to their highest level since 1948. Mr Hunt is not squeezing the wealthy to pay for tax cuts. It will be the 7 million people who will pay tax for the first time, or join the higher tax band, who will shell out. This is while cuts are being made to many frontline services. The Joseph Rowntree Foundation said real-terms spending on non-NHS services will be £17bn lower by the end of the decade.
Even on the terms by which the Conservative party won a landslide victory in 2019, it has failed. The Tories had claimed to be the party of the NHS. But there is little in the budget for the 7.6 million patients waiting for hospital treatment. Britain’s government stood on a manifesto to reduce regional inequality. Mr Hunt’s policy to level up Britain did not lavish attention on neglected parts of the country but rather on wealthy home counties and the citadel of high finance, Canary Wharf.
The jolt of the Russian invasion of Ukraine, on the heels of the shock of the pandemic, provided an opportunity to fix a broken society. But the Conservative party has been more preoccupied with factionalism than by reform of the British state. The upshot has been that GDP per capita has grown slowly at a time when there are ever louder calls to tackle poverty, deal with an ageing society and invest in a green transition. Instead, the government will be borrowing more – and spending less. Mr Hunt’s proposal to revive the economy is to reduce public investment by £20bn more than he planned last November.
The very opposite is needed. Britain requires a shift towards a prolonged period of investment growth – to raise productivity and living standards. The so-called Reagan question – “Are you better off now than you were four years ago?” – haunts Conservatives as an election approaches. Households, says the Institute for Fiscal Studies, will be worse off on average.
Sir Keir Starmer rightly chided the Tories for filching Labour policies on dentistry, the cost of living and taxing non-doms. He said that, by adopting the “intellectual triumphs for social democracy”, the Tories were living in Labour’s world. However, the budget was also about laying traps for Sir Keir in an attempt to cast the opposition as profligate. An incoming Labour government needs a fiscal framework that prioritises high and stable public investment focused on voters’ needs. An era is ending in British politics, and the sooner the better. Labour must come up with something substantial to replace it, for all our sakes.
