More than any other Cabinet ministers, chancellors tread in the ghostly footsteps of the No 11 inhabitants who went before them. And so, in the run-up to Wednesday’s Budget, Jeremy Hunt found himself channelling Gordon Brown, pledging a “prudent, responsible” Budget “focused on the long term”.
He even joked (and a Jeremy Hunt joke is a rare event indeed) that he would rather be emulating the tax-slashing hero of the Tories’ 80s heyday, Nigel Lawson, but circumstances were, alas, forcing him into emulating his Labour predecessor instead.
Hunt is essentially getting his excuses in. His fiercest critics will not be the MPs opposite, jeering at Tory mismanagement of the economy, but those chewing their lips behind him, hoping for a beefy tax and/or national insurance cut to take into the election pre-campaign, and with many on the increasingly vocal right of the party advocating for a 2p in the pound tax cut.
The difficulty is that Hunt has allowed the expectation of a major intervention to take hold – so much so that only a few months ago, he was seriously considering a cut in inheritance tax, which two weeks ago was abruptly shelved. That, as far as many Conservative parliamentarians and core voters are concerned, leaves only income tax and national insurance cuts as the meaningful issues on which they can hope for a “clear blue” economic recipe to stall Labour’s advance.
A selective and disciplined communicator, Hunt has talked frequently about being a low-tax Conservative with a fundamental belief that lighter taxation creates and sustains business and innovation. He repeated that on Sunday in a Sky News interview, albeit with the caveat that it was “unconservative” to embark on big tax cuts which could lead to a rise in borrowing and added that the reason Lawson’s tax cuts were significant “was because those tax cuts were permanent and people need to know that we can really afford them”.
This amendment to the lower-tax gospel has not gone down well in his own ranks. For some, it amounts to becoming a fully “orthodox” chancellor in the grip of Treasury projections and the Office for Budgetary Responsibility’s definition of how much fiscal “headroom” exists. Of course, that figure is one set by the Chancellor’s “fiscal rules” to manage down debt as a proportion of GDP.
“In which case, why bother having a Chancellor at all?” notes one disaffected veteran MP on the economic right of the party. “We could just replace him with an AI bot!”
For others, the whole approach amounts to a political miscalculation. “So bloody tired of Jeremy saying he is really the new Nigel Lawson, just not yet and at some point – and maybe never,” texts one irate donor.
This fire on the right may be intemperate – but it highlights a fundamental problem for Sunak and Hunt, namely to define how the Government’s offer on the public finances would differ from Labour’s.
It is often noted that Rachel Reeves has tied herself tightly to Tory tax and spending plans, but less often observed that this also presents a challenge for a Conservative chancellor and PM. Conversely, they need to show that there are still commanding reasons to “stick to the plan” – the magnificently dull new slogan emanating from Number 10 – rather than try the Labour Plan B.
Given that the election is coming this year, Tory MPs and voters fretting about the slow economic recovery might have expected this to be the big bazooka moment when the Chancellor fired a killer shot across Opposition bows. Reality has intervened, however.
The projected £30bn spending pot that was available in November (within his own rules of avoiding a rise in borrowing and managing debt downwards as a proportion of GDP) turned out to be a lucky moment. The OBR’s estimates give him a skinnier £12.5bn to dispose of, amid clamour in the party for a cut of (at least) 1p in the pound in income tax and similar in NI contributions.
Politically, that is a sensible goal for a government facing electoral annihilation – changes to income tax and national insurance hit two different audiences (middle-income taxpayers benefit more from the former and the lower paid from the latter). Arithmetically, it is a stretch – let alone the wilder hopes of more swinging tax cuts. Even the “penny in the pound” headline cut would cost some £7bn and NI cuts over half of that.
My guess is that the Chancellor and PM would like to announce something at the more modest end of the tax cutting spectrum on Wednesday to prevent the “rabbit in the hat” moment looking too skinny a creature. But in order to get to that point, Hunt will have to scrape some extra revenues from measures that would, until recently, have sounded a bit ”Labour” – taxing non-doms fully and closing tax loopholes for second home rentals and taxing vapes.
The non-dom move is a charmless one for many “temporary residents of the UK”, who have been able to pay a modest flat tax fee in return for not facing taxation on their earnings outside the country (Rishi Sunak’s wife was a beneficiary until embarrassment forced a hasty rethink of her tax status). Hunt himself was sceptical of the claims of an extra £3bn in revenues which might be raised by the measure – and suggested only a year ago that it was better to leave the scheme as it is and have the mobile wealthy spend more money sustaining their lifestyle, mainly in the posher areas of London.
It’s a sign of how tight the Chancellor’s room for manoeuvre is that a reverse ferret looks likely – any source of revenue that can be funnelled into pre-election tax cuts is now up for grabs.
In truth, none of these measures comes anywhere close to addressing the gap in the country’s finances and the rising burdens of an NHS in desperate need of an overhaul, defence spending which will need to rise in the face of persistent new threats and incentives for companies to settle and invest in the UK to drive growth and create competitive advantage.
These are the real “long-term” goals any future chancellor will have to address, with the energy of a new mandate. Anything else is about election positioning, so in the short-term of party political warfare, with the national bank account looking sparse, that is what we are likely to get.
Anne McElvoy presents the POWER PLAY podcast for POLITICO
Jeremy Hunt is already getting his excuses in before the Budget
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03.03.2024
More than any other Cabinet ministers, chancellors tread in the ghostly footsteps of the No 11 inhabitants who went before them. And so, in the run-up to Wednesday’s Budget, Jeremy Hunt found himself channelling Gordon Brown, pledging a “prudent, responsible” Budget “focused on the long term”.
He even joked (and a Jeremy Hunt joke is a rare event indeed) that he would rather be emulating the tax-slashing hero of the Tories’ 80s heyday, Nigel Lawson, but circumstances were, alas, forcing him into emulating his Labour predecessor instead.
Hunt is essentially getting his excuses in. His fiercest critics will not be the MPs opposite, jeering at Tory mismanagement of the economy, but those chewing their lips behind him, hoping for a beefy tax and/or national insurance cut to take into the election pre-campaign, and with many on the increasingly vocal right of the party advocating for a 2p in the pound tax cut.
The difficulty is that Hunt has allowed the expectation of a major intervention to take hold – so much so that only a few months ago, he was seriously considering a cut in inheritance tax, which two weeks ago was abruptly shelved. That, as far as many Conservative parliamentarians and core voters are concerned, leaves only income tax and national insurance cuts as the meaningful issues on which they can hope for a “clear blue” economic recipe to stall Labour’s advance.
A selective and disciplined communicator, Hunt has talked frequently about being a low-tax Conservative with a fundamental belief that lighter taxation creates and sustains business and innovation. He........
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