The single most influential metric for the country’s wellbeing is in a gloomy state. Lest we doubt it, the Governor of the Bank of England, Andrew Bailey, has chosen this week, in the wake of the Autumn Statement and some upbeat government news about foreign investment, to declare growth to be “the worst I have ever seen”.
Bailey is a dour governor with an odd communications style that riles ministers and sometimes seems to embrace bad news more readily than any relief. Clearly, he is dubious about Rishi Sunak’s vaguely upbeat plan for “upward momentum” in the economy and has doubts about how the Government’s modest tax relief measures can work out without inflation ticking up again.
Unsurprisingly, the Government prefers to focus on better news, which explains why the Chancellor, Jeremy Hunt, and Sunak ventured to congratulate Nissan workers on retaining the Japanese carmaker on Wearside and Tata gigafactory in Somerset. These celebrations tells us something interesting about an emerging industrial policy.
Britain is becoming more like other major EU countries in spending to support strategic manufacturing – £4.5bn over five years starting in 2025. The trouble, as the low forecasts suggest, is that the industrial policy of providing sweeteners to companies to expand in the UK are not numerous or large-scale enough to offset other problems, regulatory hurdles to exploit divergence from the EU and redress shortages of numeracy and skills in the workforce.
Given that the prospective gains from these lie further down the line than the election, Tories are beginning an economic fistfight over what their offer should look like in the post Sunak/Hunt era. This is not as simple as a left-right split. Trussonomics, for example, has fans on the backbenches and on the hardcore economic right of the party and some fans in the media and think-tanks, who believe that the strong focus of the short-stay prime minister on regulatory reform and tax-slashing was right, even if the execution was faulty.
But Trussonomics is not the template for other ambitious candidates who prefer to separate themselves from her legacy – and also have scratchy personal relations. Kemi Badenoch is the prime mover here, using a pulpit as Business Secretary to laud the strategy of shifting the UK economy towards electric cars and technological innovation, while hinting at watering down net zero targets (definitely a casus belli in the next Tory leadership race). Rather more eventfully, she has suggested breaking up the Treasury and proposing a separate department to boost productivity and commerce.
Trying to seize control of the commanding heights of the economy from the Treasury – and thus the Chancellor’s power base – is like asking Gollum to part with this ring. But Badenoch is not wholly wrong to point out that the machinery of government is not great at placing bets on growth and sustaining these.
One very senior former Labour figure notes that the Treasury was “great at making sure daft and costly ideas don’t get too much spent on them – not so great on getting funding for good ideas and innovations to flourish”.
The relative lack of influence of the Department of Business causes many of its Tory incumbents frustration. These discussions are of course more positioning the Tories in opposition than a blueprint for remaking Whitehall, but the quarrels about slow growth and its causes will start the morning after a Conservative defeat – and shape what follows it.
Expect fire and fury on that score from the Suella Braverman wing, with or without the re-emergence of Nigel Farage as an ally. Their argument is shaping up not simply to say that immigration levels are out of control, but to appeal to voters who believe that foreign labour is depressing wages and opportunities for UK-born workers. The metaphor of choice is an excessive “dependency” on immigration. The more practical challenge to the “nativist economics” wing is explaining, if many fewer incomers arrive, how roles in the NHS and care services (to name but two) are to be filled in short order, given the shortages of skills in many parts of the country.
Asking this and other economic questions from scratch will open up wounds and divisions that have been uneasily patched over for a decade: how do Conservatives move from the iconography of the Thatcher years in a time of far great upheavals in supply chains and international trade opportunities (and setbacks), without breaking into two tribes at war? The first are liberal free marketeers decried by Farage Inc – and those who believe that Britain can come up with its own ideas for economic revival, less dependent on reconnecting with Europe. What remains of the Tory left and centre will consider this to be a recipe for nativism and further impoverishment.
These two groups are much further apart in outlook – and indeed personally suspicious of each other’s motives – than the present thinking of Labour and Tory leaderships. The one fail-safe prediction is that they will go to war. Economics is the weapon of choice. The Tory future is the prize.
Anne McElvoy presents the ‘Power Play’ interview podcast for ‘Politico’
An economic fistfight has broken out as the Tories prepare for opposition
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29.11.2023
The single most influential metric for the country’s wellbeing is in a gloomy state. Lest we doubt it, the Governor of the Bank of England, Andrew Bailey, has chosen this week, in the wake of the Autumn Statement and some upbeat government news about foreign investment, to declare growth to be “the worst I have ever seen”.
Bailey is a dour governor with an odd communications style that riles ministers and sometimes seems to embrace bad news more readily than any relief. Clearly, he is dubious about Rishi Sunak’s vaguely upbeat plan for “upward momentum” in the economy and has doubts about how the Government’s modest tax relief measures can work out without inflation ticking up again.
Unsurprisingly, the Government prefers to focus on better news, which explains why the Chancellor, Jeremy Hunt, and Sunak ventured to congratulate Nissan workers on retaining the Japanese carmaker on Wearside and Tata gigafactory in Somerset. These celebrations tells us something interesting about an emerging industrial policy.
Britain is becoming more like other major EU countries in spending to support strategic manufacturing – £4.5bn over five years starting in 2025. The trouble, as the low forecasts suggest, is that the industrial policy of providing sweeteners to companies to expand in........
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