One of the most striking pieces of recent polling showed nearly 80% of Britons think public services have deteriorated in the last decade. This would seem an electoral gift to Labour. But as this week’s autumn statement shows, the long shadow of austerity is hugely problematic for both parties.
Jeremy Hunt’s de facto budget was, even by the usual standards of such events, something of a smoke-and-mirrors affair, boasting of big tax cuts while contributing to a fiscal mix in which the average household will be worse off.
Arguably, the most slippery element of all was the decision to finance tax cuts by huge real-terms cuts to public spending planned from 2025, by which time, as Hunt knows very well, his party is unlikely to be in power.
It is now more than five years since Theresa May declared that austerity – the David Cameron/George Osborne ethos of massive cuts to public services, loaded mainly on to councils – was over.
But as voters battle with everything from overcrowded trains to dangerously crumbling schools, plus various local authorities going bankrupt, this idea may seem absurd.
That is the bind in which Hunt has arguably placed the Conservatives ahead of the election in his eagerness to assuage the demands from his MPs for tax cuts.
The Tories are lashed to the mast of a fiscal ship that already austerity-weary voters will be told is set on a course for even more significant spending curbs, curbs so severe that even Osborne has warned they could be unpalatable.
Speaking on the Political Currency podcast, the former chancellor and his co-host, the former shadow chancellor Ed Balls, noted how the lost £20bn would be loaded on to the departments not specifically protected.
“People will start to look through it and say, my God, they’re actually going to cut the arts budget, the environment budget, the justice budget,” Osborne said.
There is, however, a second part to this political equation, one fully understood by Hunt and summarised by Osborne: “Labour, they’ve basically got to go along with these numbers, haven’t they?”
Have they? Yes and no. Shadow ministers are acutely aware of the trap set in the autumn statement: promise more spending and generate a wave of Conservative attacks about profligacy; or stick to Hunt’s template and go into an election basing promises of a better future largely on thin air and hopeful thinking.
The likely answer will be to discuss such matters as little as possible, and when the election approaches and more detail is needed, lean heavily into the already watered-down plan to borrow £28bn a year to invest in green jobs and industry.
There is some fiscal leeway if spending goes into investment, for example infrastructure that will generate long-term benefits, such as productivity gains from better transport links or public sector IT systems.
There is increasing debate, even on the right, about the way the years of austerity have left the UK struggling in such areas.
Ian Mulheirn, an economist with the Resolution Foundation thinktank, said the lack of stable long-term infrastructure spending had been a particular problem for the UK: “It’s something that we’ve been pretty terrible at since the 80s. There was a big political dividend to be had from essentially living off the capital stock we already had, and not replacing it. That’s now coming back to bite us.”
As such, he said, sticking with Hunt’s planned spending reductions was very unlikely to be realistic, whoever took over as chancellor: “He has essentially taken spending for the future and given it away today. It’s a very, very large hole that the next chancellor is going to have to fill.
“There’s just going to have to be a whole load of tax raised, and the important point to recognise is that this will happen whatever party is in power. I think you’re looking at a very large tax-raising budget, either immediately after the election or at least over the course of the early years, in order to keep the wheels on.”
For Labour, he said, there would be the added difficulty of voters expecting public services will improve under Keir Starmer: “I’m sceptical that keeping-the-wheels-on type of solution is enough. They probably would have to go further.”
