The economy is doing well and anybody who says differently subscribes to declinism. That was Jeremy Hunt’s message to the Conservative party conference on Monday as he attempted to chart a course between persistent calls by Liz Truss and her supporters for tax cuts and warnings against another round of austerity measures.
In a spirited speech that portrayed the economy in rude health, Hunt said: “It’s time to roll up our sleeves, take on the declinists and watch the British economy prove the doubters wrong.”
The latest business surveys show the economy is on the brink of a recession with a housing market that the Nationwide building society said fell 5.3% in the year to September.
Setting that aside, Hunt’s crowd-pleasing announcement was a £1bn saving from a freeze on Whitehall jobs and a further crackdown on benefit claimants that he said would bring more people, many of them currently classified as disabled, back into the workforce.
There were cheers from the Tory faithful for the two new measures, but economists were quick to point out they would make little difference to the economy or the government’s ability to finance public services that are facing large funding shortfalls.
The Office for Budget Responsibility (OBR), which provides Hunt with forecasts of the public finances, is expected to heap further pain when it next carries out a health check to coincide with November’s autumn statement.
Hunt told the conference that inflation had come down by 40% over the past year, but the OBR is expected to say inflation is much higher than it predicted in March, robbing Hunt of any pre-election spending power.
With this in mind, Hunt’s message was that tax cuts can only follow cuts in spending. And while he characterised lopping 60,000 off the expected Whitehall headcount as straightforward, he knows further savings, and especially cuts to public services, will be painful.
The Nuffield Trust, an independent health thinktank, has estimated that the NHS will be handed £5bn less than promised next year, while another, the Institute for Fiscal Studies (IFS), has said high levels of inflation translate into big budget deficits in many other departments.
The IFS said recently that an already high level of taxes was likely to rise further without “root and branch” reform or a large cut in the level of services on offer.
“There are a lot of areas of public services where it looks like they need more money,” the IFS boss, Paul Johnson, told Sky News after the speech.
Labour and the Liberal Democrats were depicted as spendthrifts that will drive up Britain’s debts for little gain.
Yet conference goers were given little idea how the Conservative party will pursue a different path.
While Hunt attempted to inject excitement into the journey towards a 2024 general election, the Tory faithful could be forgiven for being confused about the direction, let alone the means of getting there.
In the end, it will be the cost of living crisis, rising unemployment and extended NHS waiting times after another bruising battle with the doctor’s union that will determine the government’s election chances. How many civil servants are in post next year is unlikely to resonate in the same way.
