“Whatever it takes” – Rishi Sunak
Do you remember the good old days? Those days when the Conservatives were the party of fiscal discipline? The days when Prime Minister May would respond to Jeremy Corbyn’s call for greater public spending with a lecture on the need for a strong economy as this was the only route to improving public services. May would compare the nation’s finances to her household income. One could not spend more than one had coming in as that would rack up debts that would fall on the underserving grandchildren. There were enough Tory Party dog whistles in this for it to work every time. May, the careful steward of the nation’s coffers – Corbyn, the reckless spendthrift.
A few inconvenient truths like the nation having a national debt for hundreds of years and having only recently paid off the debts incurred fighting Napoleon were tucked away.
The good housekeeping approach sustained us through the Cameron and May governments until Boris Johnson discovered that careful management of the public purse was not quite so sexy after all and, if you attached spending to the “people’s” new found priorities, nobody much cared where the money came from. So in December 2019 the notion of a balanced book disappeared over the horizon like an escaped hare as spending on roads, railways, broadband, schools and hospitals become all the rage. Prudence was no longer the word on the street and had been replaced by “levelling up” and “building back better”. And along came the Coronavirus pandemic!
This did not lead to a new, more cautious management of the nation’s money but instead more of the same, this time labelled “whatever it takes”. In addition to the election shopping list were added schemes to protect jobs, incomes and business. It seems not to matter that we have witnessed a collapse in Treasury income as VAT receipts drop and so does income tax and national insurance collection as the economy heads into pandemic-inspired recession. The national debt is now higher than GDP for the first time since WWII, but May and Cameron have made no comment about the reality that 10 years of their inspired austerity has achieved precisely nothing apart from decimated public services.
This might all be sustainable for the time being as interest rates remain at record lows making it easier and cheaper for Governments to borrow. However, the Chancellor has hinted this cannot carry on indefinitely and eventually the books will have to be brought more into balance. If not, borrowing will become both more difficult and more expensive. The nation’s credit rating is as low now as it was 10 years ago.
Given what the Chancellor has said it begs the obvious question: “who pays the price?” Given that the ideological ditch Boris Johnson would choose to die in is not raising direct taxes, what are the real options facing the Government given that massive cuts in capital expenditure would be seen as a betrayal of their new found friends in the north?
The answer lies in plain sight. Boris Johnson and his MPs have sent out a clear message on whose backs the nation’s books will be balanced. It is their old favourites, the feckless poor and particularly women. Those, they claim, who cannot afford to feed their children and cannot budget the welfare payments to which they may be entitled. Those who recklessly chose to have children they cannot afford to look after.
The Tory MP for Mansfield tells us free school meal vouchers are being used to fund drug dealers and brothels in his constituency. Given vouchers cannot be exchanged for cash this is obviously nonsense but why let an opportunity slip to point the finger and further create the illusion of the undeserving poor?
This is not an accident. It a deliberate act of Government policy and heralds a further attack on welfare payments as part of the Chancellor’s plan to balance the books. In the cross hairs will be migrants, single women, particularly those with children, those leaving the criminal justice system, those with drug addition issues, the disabled, the homeless, those families with too many children according to the popular press’s calculations, etc. Indeed, anybody to whom the label of having brought their situation on themselves will be targeted. Anybody who likely Tory voters choose to define as feckless and an author of their own misfortunes.
A target figure for welfare savings will be identified and its consequences hidden in the labyrinth of rules and regulations of actually claiming and securing any support. Criticism will be met with a press release stating how much the Government is spending on welfare as part of its commitment to helping the most needy. Problem is, it depends on how the most needy are defined and who decides how much help they are going to get. Take what you are given and do not be ungrateful will be the message. Anybody standing against this will be labelled a bleeding-heart lefty activist. Priti Patel will be available to provide guidance.
There is just a chink of light that this might just not work. Over recent weeks Marcus Rashford has run rings around Boris Johnson on the issue of free school meals during the holidays. Perhaps within communities there is a new-found spirit of social solidarity and we are becoming less willing to be divided by politicians and diverted into blaming each other. Only time will tell but it is not a good look for outrider Tory MPs to be attacking Rashford on Twitter. It smacks of desperation. Rashford is immune to the usual attacks politicians make on each other. I suspect Marcus just does not care and simply sees a problem he can help with further emboldened by all the support he is receiving.
If the Tories cannot attack welfare support as a substitute for income tax rises their economic recovery strategy will be badly damaged. Only time will tell.
Attacking welfare will not be the end of the misery for those at the lower end of society’s scales and, therefore, less likely to vote Tory. Although Johnson is unlikely to raise direct taxes (after all he is a self-professed low tax Tory), this largesse is unlikely to stretch to indirect taxes. Step forward an increase in VAT as part of the recovery package. The poorer you are, the more of your income is likely to be disproportionately spent on indirect taxes. The better off you are the less effect it will have as a smaller percentage of your income goes on VAT. Apart from a short-term effect on inflation, this is a pretty easy hit for the Chancellor. Remember George Osborne did it in 2010 and there was barely a whimper. If there are any issues, I am quite sure Boris Johnson can arrange a VAT reduction for grouse shooting parties.
Raising Council Tax is another free hit as the Chancellor can blame those wasteful local authorities, particularly those run by Labour.
The economic recovery programme could then be completed by further reductions in public expenditure but, as always, in the name of efficiency. Local authorities will again be in the firing line. This will include a return to a freeze on public sector pay. This came true last Tuesday. Boris’s outriders will be briefed to remind us that jobs in the public sector are jobs for life (not true) and why should they be protected when private sector employees are having their pay frozen, reduced or taken away? The media will oblige with interviews of private sector employees losing pay or their jobs. Why should the public sector be protected when we are not? Public and private sector workers will be set against each other.
In a piece of cynical political calculation, the Chancellor has avoided placing NHS workers in the public sector pay freeze. We have yet to find out if that includes all NHS workers and not just hero doctors and nurses.
So, as the economic challenges facing the Chancellor come starkly into view, is there any evidence the books will not be balanced once again on the backs of the poor, public servants and the services they provide and those dependent on welfare? Some of the public sector heroes of the epidemic will quickly be demonised for not doing their bit to steady the ship of state. Step forward teachers, fire fighters, police officers and trash collectors etc.
At present there are few hints emerging from No 11 that Rishi will be following a different route by, for example, raising taxes significantly on the broadest shoulders, getting multinational corporations to pay a proper share of Corporation Tax, investing in growth via job creation and retraining, raising VAT on luxury goods, subjecting private school fees to VAT and recovering the enormous waste of tax payers’ money associated with responding to Covid-19.
So, are we in for another 10 years of austerity by another name made worse by the knock-on effects of leaving the EU? It is beginning to look that way following the Spending Review earlier in the week. The detail will be filled in as each year’s budget is announced but the policy framework has been set in the Spending Review.
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