Sunak opts to suck it and see

25 Nov

We must be thankful that no-one is forecasting that Government borrowing will rise to record levels this year.  Or Rishi Sunak wouldn’t have been in a position to announce that Government spending will rise at its fastest rate for 15 years.

Apologies for the sarcasm – which isn’t aimed at the Chancellor’s measures, but is meant instead to provide an introduction to the thinking behind them.

One response to a ballooning deficit is to cut the rate of growth of spending.  That’s what the Coalition did after 2010, when the deficit hit seven per cent of GDP.

The Office for Budget Responsibility is forecasting a peak of 19 per this year.  But Sunak’s response is to raise the rate of spending.  Why?

Because in 2010 George Osborne judged the deficit to be structural (he was right), and his successor judges this one to be exceptional (he’s right, too).

It is almost entirely a product of the pandemic and what has followed.  It is in this context that the OBR forecasts the economy to shrink by 11 per cent this year and unemployment to hit 2.6 million next year.

In these circumstances, the Chancellor has found it impossible to produce the four year spending review he hoped for, and has been forced to issue one for a single year instead.

Furthermore, his statement was only one side of the tax and spending coin. Today, we got the spending.  In the Spring, we will get the Budget – and the tax.

Given all this, it will be very odd if Sunak turns up then with large-scale tax rises to raise revenue quickly.  The foundation of his measures today appears to be: suck it and see.

Broadly speaking, the spending package suggests that the Chancellor is going for growth.  That’s the logic of the infrastructure spending, the coming review of regulation, the new northern bank and the enlarged Restart programme.

The Levelling-Up Fund is a classic Treasury exercise in the English centralist tradition, with its central feature of bids from the provinces to Westminster for money.  So it is in a country with relatively few local taxes.

On that point, Sunak announced “extra flexibility for Council Tax and Adult Social Care precept”.  Local authorities will like that, council taxpayers not so much.

It’s worth stressing that the OBR’s forecasts, like all such animals, shouldn’t be taken too seriously.  Our columnist Ryan Bourne debunked its record on this site earlier this week.

If you walk down the sunny side of the street, you will smack your lips at the thought of a Roaring Twenties effect, as employment recovers, consumers spend, the hospitality sector booms and people pile into holidays abroad.

And it may be that post-Covid changes even out for the better, with a shift in activity and spending from city centres to the suburbs and countryside, together with music, art, theatre and all the rest of it.

That might not be such a bad things for towns and their centres, at which the new Levelling Up Fund is partly aimed.  Our columnist James Frayne believes they are a core concern for provincial voters, and government listens to him.

If on the other hand you stick to the shady side, you will point to the economic equivalent of Long Covid: fearsome economic and social bills for damaged mental health, postponed operations, lost educational opportunities.

All that is a big minus for levelling-up – because it’s the disabled, poor and disadvantaged who have been hit hardest by restrictions and lockdowns, especially if they work in the private sector.

The background in recent years is not encouraging.  Since the financial crash exploded, we haven’t grown at more than 2.6 per cent a year.  That suggests recovery may be sticky.

Sunak’s persuasive manner, grip of detail and spare eloquence have served him well during this crisis.  Others holding his post would not have survived roughly ten major finance annoucements in less than a year.

It’s not as though he hasn’t sometimes had to recast his plans – as in October, when he pumped more money into his Job Support Scheme.

And if the economics of his strategy are straightforward enough, its politics was sometimes a bit odd.  If the Government’s overall plan in the short-term is expansionary, why raise the minimum wage but curb public sector pay?

If spending on nearly everything else is rising, why crack down on the 0.7 per cent aid spend?  Doing so because you think aid is wasted or the target is wasteful is one thing.

But that wasn’t the basis of Sunak’s decision – since, after all, he said that the Government intends to return to 0.7 per cent “when the fiscal situation allows”.

The Chancellor also left a big unresolved question hanging in the air.  What will the Government do about the Universal Credit uplift?  Will it be extended or not?

The sense of a statement with contradictory messages was picked up Rob Covile of the Centre for Policy Studies.  (The Treasury would do well when the Budget approaches to look at its supply side ideas.)

“Feels slightly like Treasury couldn’t decide whether the message was ‘tighten belts’ or ‘we’re still spending’,” he tweeted. “So we’re getting two or three minutes of each in turn.”

That first element in the Chancellor’s statement, plus the OBR’s horrid short-term forecasts, comes at a bad time for the Government.

For tomorrow, the toughened tiering details are announced. Lots of Conservative MPs won’t like them.  The detail of which tiers apply in which areas will be published, too.  Many Tory MPs will like those even less.

Graham Brady, Steve Baker, Mark Harper, and the Covid Recovery Group will say that the economic damage of restrictions is so severe that the Commons should not vote for more – at least, without an impact assessment.

They may not be alone.  “These measures may be a short-term strategy, but they cannot be a long-term one,” Jeremy Wright declared in the Commons during the recent debate on the lockdown regulations.

He and Edward Timpson (another ex-Minister) plus other MPs backed the Government but, sounded a cautionary note.

Will the prospect of vaccines be sufficient to rally the doubters round?  Or will they take a leaf from the book of Theresa May, who savaged the regulations during the same debate?

We shall see – but Ministers are not helping themselves by dodging requests for that impact assessment, urged by this site and others, and the subject of a dogged campaign by Mel Stride, Chair of the Treasury Select Committee.

All in all, Sunak is shaping up to go for growth.  Good for him.  Nonetheless, he must watch and wait to see how and when the economy rebounds.  Brady and company are less patient.

David Skelton: The Government must not forget that it was working class voters who delivered the 2019 majority

17 Nov

David Skelton is the author of Little Platoons: How a revived One Nation can empower England’s forgotten towns and redraw the political map.

Last December, people who wouldn’t even have considered voting for us ten, or even five, years ago put their cross in the Tory box for the first time ever. Constituencies that had been Labour since their formation voted Conservative with remarkable swings. These voters had long been forgotten by the newly gentrified left and, in the aftermath of the referendum, had often become the butt of sneering and snobbery.

Working class voters, who had seen their economic and political priorities ignored by politicians of all parties for decades, saw that their concerns were being at long last listened to. They entrusted us with their votes, sometimes enthusiastically, sometimes warily, in the hope not only that their Brexit vote would be implemented at last, but also that, as a government, we would prioritise improving their lives and their communities. We should take that trust that was placed in us very seriously indeed.

A working-class Tory agenda is economically and politically the right direction to take

We should reflect on this trust that was placed in us and the basic political maths as we ponder the excellent question posed by Rachel Wolf on these pages on Saturday. In a nutshell, this question was whether we use the present “reset” to focus on the working class voters who delivered the 2019 majority or shift priorities towards the more affluent in a revival of a politics aimed at middle class metropolitans. For political, economic and moral reasons, the only correct path is to retain our focus on the working class voters who backed us in such numbers last year.

Politically, this new electoral coalition delivered the biggest Conservative majority in over thirty years. Only an electoral coalition centred on winning working class constituencies enabled us to do this and only this coalition would enable us to win another big majority in four years time. So-called “DE” voters backed Labour over the Tories for the first time and we had a 15 per cent lead over Labour amongst “C2” voters.

This allowed us to make some remarkable gains, from my home town of Consett to Andy Burnham’s old seat in Leigh – both symbolic of a “Labourism” that isn’t coming back. Electoral coalitions can’t be turned on and off like a light switch and we must continue the present focus. Maintaining this focus on these working class voters is the only realistic route towards a lasting Conservative majority and an enduring realignment.

We remain the custodians of the trust that was placed in us and we must repay it by delivering the substantial, positive and lasting change that we promised. This kind of change – boosting long-forgotten parts of our imbalanced economy – would also make our economy more productive and the country as a whole more prosperous. When parts of the country are held back from fulfilling their economic potential, that is a problem that impacts everybody. We must redouble our efforts to level up and genuinely create One Nation.

A One-Nation agenda of improved town centres, rising real wages, better jobs and improved infrastructure

In Little Platoons, published last year, I set out how an ambitious agenda of reform could transform long-forgotten towns, through infrastructure spending, transformation of town centres and a policy of reindustrialisation. We have made great strides so far but we now need to go even further and even faster, particularly as both the health and economic impact of Covid-19 risks impacting working class communities in the North more than prosperous communities in the South.

As James Frayne suggested last week, one of the key priorities should be making sure that town centres start to look and feel better over the next few years. Rather than being pockmarked with empty shops, bookies and discount shops, high streets must become symbols of community pride. Town centres should become community hubs – places for people to shop, businesses to set up (rather than in distant out of town business parks) and for families and young people to meet up and come together. Revived town centres should leave as lasting an impression of local and civic pride as the likes of Birmingham City Hall and the majestic Grey Street in Newcastle.

Just as people should see a difference in their town centres by the end of Boris’s first full term in office, they should also see a difference to their pay packets and their local economy. Despite the Covid associated economic hit, there must be a focus on creating economic revival in “Red Wall” areas.

As I made clear here a few weeks ago, our impending freedom from EU regulation will give us greater scope to use industrial strategy to help revive post industrial towns and promote a policy of reindustrialisation, including being leaders in green industry.

This should include aiming to shift the type of jobs that predominate in these towns from low-paid, insecure work to making them a central part of a high-skills, high-productivity, high-wage, tech-driven economy. We should enable local leaders to do whatever it takes, including through the tax system, to encourage industrial investment in their areas.

Part of the case I made in Little Platoons is that a direct government lever for revival is by relocating great swathes of the Civil Service to the North and the Midlands. An impressive report by the Northern Policy Foundation, published this week, shows that such an agenda would put “rocket boosters” under levelling-up and allow local areas to benefit from the agglomeration effect of relocating key arms of government.

We should also be stepping up investment in infrastructure programmes, to ensure that towns as well as cities have world class road, rail and digital infrastructure. We should consider how light rail can make a difference to people in “Red Wall” towns and also mustn’t forget about the importance of high quality, reliable and inexpensive bus services to local people. When even the deficit hawks at the IMF are arguing that now is the time to invest in infrastructure, we should be prepared to show audacity and imagination with big infrastructure projects for the North.

A relentless focus on making change happen

We must have a relentless focus on making this change happen. Levelling up should go through everything we do. Every day, ministers should ask themselves how their decisions are improving the lives of working people and to advance the levelling up agenda. And we should manage and track the levelling up agenda against these key metrics of improved town centres, rising wages, better jobs and improved infrastructure.

This is a One Nation government and levelling up is a definitively One Nation policy. As Damian Green argued as part of this series on Monday, building one nation is a conservative, not a libertarian, project. That means we should be prepared to use the power of the state to tackle regional economic inequalities (the GDP per head in the City of London is 19 times that in County Durham) and restore hope and economic vibrancy to long forgotten places.

We must make it our defining mission to repay the trust that working class voters placed in us and ensure that their lives are better and their towns are better places in which to live. If we do so, the realignment will be a lasting one. Now, more than ever, we must double down on levelling up.

James Frayne: Public support for the Government appears to have dropped – but not when it comes to individual policies

4 Aug

The conventional wisdom on the polling is the Government is fast losing public support on its handling of the Coronavirus crisis – and therefore that the Government is handling the crisis badly in reality.

While it’s true that the polls have moved against the Government from the early days of the crisis when approval ratings were sky high, the story isn’t as simple as the public turning against the Government.

Interestingly, on individual policy announcements, for example the Northern lockdown, public support remains high. The public back the Government on specifics, but not in the round. So what’s happening?

Let’s begin by looking at the polling on general Government popularity measures. The picture is clear: the public has become less sympathetic over time.

  • ConservativeHome’s newly released panel survey showed the PM’s popularity has slipped for the third month in a row.
  • YouGov’s tracker on perceptions of the Government’s handling of the crisis has shown a steady decline since the Spring.
  • Opinium’s tracker shows the same, with their most recent figures showing a net disapproval rating of -15. They also show a relatively narrow lead over Labour in the voting intention tracker.
  • A new study by Ipsos-Mori and KCL revealed an array of metrics showing public concern about the way the pandemic has been handled.

But now let’s look at the data on individual policies.

  • People appear to very strongly support the Government banning separate households meeting indoors in those parts of the country where the infection rate has risen.
  • People appear to strongly support the Government’s announcement that those with Coronavirus symptoms should now self-quarantine for 10 days rather than seven.
  • The majority of the public appears to be unsympathetic to those British people that went to Spain and got caught out by the demand to self-quarantine on their return – a decision for which the Government received enormous criticism.
  • People also appear to support restaurants having to show calorie counts on their menus – a suggestion the Government was said to be considering as part of No 10’s new focus on obesity. (I actually think this would drop like a stone when faced with a counter argument on burdensome regulations during a pandemic, but that’s another conversation).
  • The polls show the public support the requirement to wear masks in supermarkets and they want the supermarkets themselves to be tougher on compliance, presumably by refusing entry to those without masks or refusing service at the till.
  • The use of face masks has surged dramatically more generally.

What accounts for these stark differences, where the Government is losing support but where the public actually back its main policy announcements? There are a number of reasons why this might be the case.

First, it’s possible the public actually still favour extremely tough measures overall – much tougher than the Government is prepared to take. It’s possible they still favour what amounts to a near full-lockdown and, therefore, the support they give to specific policies is almost given in exasperation – as if to say: “of course they should do this, why haven’t they done so before?”

I think this is very likely the case among older and more affluent people, where the mix of fear and an ability to work from home and maintain their living standards means they take a very safety first approach. It might still be the case for many others.

As I’ve written before, the Government’s reputation has also ultimately been perversely damaged by the huge success of the furlough scheme. The fact that it worked smoothly and held up most people’s earnings meant it acted like morphine; it made people think the pandemic was almost exclusively a health crisis, not an economic one.

It made many think that the lockdown was a perfectly acceptable way to spend several weeks – not something that was crippling the economy. As such, many people believed, and still do, that the lockdown should keep going indefinitely. Were they exposed to job losses and higher taxes, they’d likely change their minds on this quickly.

In summary, it’s possible the Government is being punished for opening up the country too early.

Second, it’s possible that the little minorities of people who oppose Government action on, say, increasing the quarantine, actually all mount up to a majority overall, which brings down Government support.

So, a significant minority in the North of England might be angry about the new lockdown there, while a significant minority of holidaymakers might be angry about the new quarantine demands, and so on. In the end, the angry and annoyed on one issue accumulate to a large number. It’s as if everyone’s annoyed, but for different reasons. There’s also clearly just generally a virus fatigue: “when will it ever end?”

Third, we have to look at the role of Government communications. The Government has been accused of giving out mixed messages in recent weeks – most recently, encouraging people to go to restaurants while also telling people to stay apart and wear masks, or encouraging people to go to restaurants while telling them to eat healthily.

The Government’s view appears to be that they need a degree of ambiguity – yes, to encourage people to return to some form of normality, while always reminding them to take care because the virus hasn’t gone away. I have sympathy with this because the medium-term future is so uncertain and because the Government is balancing outrageously complex and high-stakes issues.

In truth, no one really knows what’s going to happen. However, the fact remains that their messages and stated priorities can look contradictory – and this in turn can make them look disorganised, which in turn can eat into their reputation for competence.

Fourth, it looks like party politics is returning to the public mind slowly. The gaps between Conservative and Labour voters on questions of competence and general handling reveal huge differences in opinion.

In short, Labour voters think the Government has done a bad job, even if they give support to specific policy ideas, while Conservative voters are cutting the Government slack. If Starmer starts drawing a greater contrast between Conservative and Labour policies – most obviously over economic recovery policies – we should expect these differences to become starker.

Where will the polls go? It’s hard to say. If there’s another serious spike in cases and another health emergency develops, it’s possible that people will again rally behind the Government for doing a difficult job in difficult circumstances.

But I suspect, in reality, now people have become accustomed to the habits and language of the pandemic, and now Labour has a basically competent leader, that the Government’s approval ratings will return to where you’d expect a Government that has been in power for a long time to be – with a divided country and a very large number of disgruntled voters.

James Roberts: Big state spender Roosevelt shouldn’t be Gove’s new role model

1 Jul

James Roberts is Political Director of the Taxpayers’ Alliance.

Our de facto prime minister, Michael Gove, has been a busy man. On Tuesday, he was in the Commons explaining Mark Sedwill’s sudden departure. At the weekend, he delivered a much-vaunted address to the prestigious Ditchley Foundation, joining a long line of luminaries: Mark Carney, David Milliband, John Major, Chris Patten, to name but a few.

Sparing the blushes of the distinguished Ditchley crowd, Gove didn’t mention Brexit much. But what he did deliver was a rare tour de force about the challenges facing Western governments, delivered with daring incisiveness by the Government’s ‘Hand of the King’. If the ever-authoritative media talking heads (and rapidly-departing civil service barons) want to know what ‘hard rain’ that nasty Dominic Cummings has in store for them, Gove’s lecture was a good place to start.

He didn’t pull his punches. For the ‘Forgotten Man’, faith in the system has been broken, “compounded by cultural condescension and insulation from accountability”, with the policy-making elites in political parties and the civil servants in the dock.

Reasonable demands, or taxpayers’ money to be well spent on accessible public services that actually work have been ignored. The top tiers of mandarin management are stuffed with like-minded PPE-ists, dripping in self-reinforcing groupthink, preaching every form of diversity going – except diversity of thought.

Gove described with brutal accuracy the tendency to coalesce around a cosy Westminster consensus, perpetuated by media commentary and pressure group plaudits, with almost non-existent evaluation of real world delivery. But the government eco-system is dying – its credibility eroded away by constant deforestation to feed an insatiable 24 hour media cycle, the whims of easy-choices-only politicians and the childish tantrums of the Twitterati. The spirit of intellectual challenge has been driven out of the forest, with generic generalists climbing high and genuine innovators buried in the undergrowth.

He’s bang on. As Matt Ridley identified back in 2013, policy-making has long been broken: sometimes little more than a string of special interest spending demands; elaborated on by so-called experts; written into submissions by pedantic pen-pushers; approved by malleable ministers; and made into law by preoccupied politicians.

‘Doing something’ is the name of the game. If social media demands it, laws can be changed. If the media suggests it, money can be found. The Forgotten Man – that is, the taxpayers who pay for all this – be damned. Their preferences are secondary or even, as Gove suggests, absent entirely. A quick reference to ‘taxpayers’ money’ seems often enough to settle the consciences of Tory ministers, as they implement evermore expensive government intervention, because a hashtag told them to.

The TaxPayers’ Alliance knows calling this out doesn’t win you many friends: you can count on one hand the number of policy-makers willing to go against the grain. At DEFRA, lest we forget, Michael Gove was quick to join the chorus of environmentalist big spenders, navigating Theresa May towards a non-negotiable £1 trillion net zero commitment (which by our reckoning no government department has any idea of how to achieve). But then, there’s no zealot like a convert.

But a form of zealotry is exactly what government reform needs. The so-called ‘Rolls Royce’ civil service has broken down by the roadside. On that front, Gove wasn’t short on bold solutions. As our landmark polling last year with ConservativeHome’s columnist, James Frayne, showed, more than six in 10 working class taxpayers agree with the suggestion that we should move more central government offices and jobs outside of London.

Almost three quarters of them believe that all civil service jobs should be open to applicants without a degree, perhaps hoping to break the hold of the hapless humanities graduates. A hard-nosed look at value for money is vital, too.

Gove namechecked numerous programmes, including his old chum David Cameron’s £1 billion National Citizenship Service, which could benefit from a proper quantitative analysis of success and failure. There should be nothing noteworthy about a politician taking aim at programmes, like the £920 million Troubled Families scheme or (Gove’s own) Pupil Premium, and asking if these really delivered for taxpayers. But in the punch-and-judy pantomime of the current political debate, this feels revolutionary.

The same can be said of some of his other policy proposals. In a speech so wide ranging it would usually have a Prime Minister worried, Gove called for  planning reform to fast track beautiful development, better use of data in the NHS, transparency on court and school results, reviews for failed anti-radicalisation programmes, interrogating defence procurement contracts and accountability on the impact of aid spending. Many of these things should be music to taxpayers’ ears.

But the implications of all this are far from clear. As the punters know, policy outcomes matter more than policy processes. Reviews often come to nothing. Promises aren’t worth the paper they’re written on. The devil’s in the detail. What does Gove actually want to achieve?

Does turning to more data in the NHS mean only allowing for government-made track and trace apps, which inevitably fail? Does it follow that reviewing a failed social programme results in it actually being abolished, and taxpayers getting their money back? Does accountability for aid spending mean cutting back the £15.2 billion cashpoint in the sky, or simply swapping money between dodgy dictators and wasteful NGOs?

he voters we polled wanted foreign aid reduced and reallocated to other priority areas such as the police, the NHS and schools. Very few people care how the sausage is made – they just want aid cut. But that’s an uncomfortable view in SW1, and incidentally not one that Michael Gove shares. It’s the same with the majority (68 per cent of C2DE voters) who backed abolishing the BBC licence fee. When he becomes inconvenient, or wants things that really upset the Westminster village applecart, the Forgotten Man is once again forgotten. Politicians just come up with better ways of ignoring him – the endless reviews and the broken promises.

In that sense, Gove’s speech could easily have been given by a much more fitting figure for the Ditchley Foundation: Tony Blair. Like Gove, he reached for the model of America’s big spending New Deal, under Franklin Delano Roosevelt. New Labour offered innovation, clever solutions and new public service delivery models, with a pledge and a commission for every occasion. Gove and his Cameronite contemporaries looked on in awe, while most Conservative voters were horrified at the economic paternalism, metropolitan condescension and fiscal vandalism of the Blair years.

Many still believed that reams of government data and endless initiatives can never outgun the free and rational choices of millions of individuals. Their ears still rung with the mocking rebuke of Ronald Reagan: “I’m from the government and I’m here to help.” Endless cash flow means that civil servants, not taxpayers, still made the rules. The TaxPayers’ Alliance itself was founded to take a stand.

Blair paid the price for ignoring his own voters, and taxpayers got sick of the Westminster consensus he created – ‘expert’ policy tsars, expensive PFI, and constant right-on crusades – arguably leading up to the EU referendim result in 2016. For a man so intimately involved in that campaign, Michael Gove may sadly be in danger of starting off down the same path. Replacing Oxford-educated experts with world-beating data whizz kids, or swapping a programme here with a review over there, won’t change the Blairite policy-making consensus – unless there is fundamental change of political intention at the top.

Britain’s forgotten taxpayers need Michael Gove’s intentions to be as bold as his analysis.