What impressed me most about the delivery of last week’s autumn statement was the good-humoured – almost jovial – manner in which our fourth chancellor in three years unveiled a seemingly endless list of measures supposed to promote “growth”.
In most cases they were nothing of the sort. But Jeremy Hunt was so relaxed that one wonders if he believed a word of it. I had the wicked thought that as his party is assumed by most observers – not least its own members – to be approaching the electoral scaffold, the prevailing mood was one of “lie back and think of the election after next”. Meanwhile, they can enjoy the spectacle of a Labour party struggling to carry out its traditional role of trying to sort out the mess it is likely to inherit.
Sorry: did I say his party? As a veteran former Tory MP told me last week, there are now three wings of the party – the moderate wing, which contains what are left of the traditional one-nation Tories, but is itself more rightwing than it used to be. Then the right wing, which constitutes the majority of the parliamentary party. Then the off-the-wall right wing, of which the egregious Suella Braverman is the quintessential example.
Despite the fact that, as the Office for Budget Responsibility emphasised, the “tax burden” is rising, Hunt enjoyed himself by claiming that, thanks to the two-percentage-point reduction in national insurance, it is falling.
The OBR, the Institute for Fiscal Studies and others have pointed out that, thanks to the phenomenon known as fiscal drag – inflation pulling more and more people into higher tax bands – the chancellor has been, in effect, robbing Peter to pay Paul – or robbing Peter to pay Peter. Or perhaps, these days, one should say robbing Petronella …
Recent surveys indicate that the public is more worried about the dilapidated state of public sector infrastructure and services generally than taxes, implying that the concerns of various branches of the Tory party are misplaced. This did not, of course, stop Hunt and his autumn statement co-author, Rishi Sunak, from positioning the timing of national insurance cuts in January, to be followed by 1p off the basic rate in April in preparation for a possible spring election.
However, an early election would depend on a rapid, and unlikely, improvement in the Tories’ polling figures. The prospect is for the near-recession to persist, and the Bank of England to maintain a level of interest rates which for many is punitive. Moreover, average living standards continue to be depressed.
Talking of the Bank, I note that it has made the connection between Brexit and the subsequent deleterious impact on investment – not least the collapse of foreign direct investment in the UK since the 2016 referendum. Yes, chancellor: business investment is indeed a vital component of economic growth, but it has been seriously impeded by Brexit and is unlikely to be assisted by the cuts in investment threatened by the autumn statement.
Which brings us to the improvements in productivity wanted by the main political parties, and Brexit – a word that was conspicuous by its absence in both the autumn statement and Labour’s response.
Improvements in productivity were undoubtedly held back by the financial crisis of 2007-08 and the post-2010 policy of austerity. And then came Brexit. The truth is that entry into the European Economic Community in 1973, and joining the single market which the Thatcher government had done so much to help create in the mid-1980s, had a beneficent impact on the UK’s productivity; but since the 2016 referendum we have gone backwards.
The arrival back in the cabinet of David Cameron produced derisive laughter among some of my EU contacts. This is the man who called the referendum. Who was the oracle he consulted to convince him that he would win? His own self-confidence, I suspect. He was hoping once and for all to conquer the Tory Eurosceptics – famously referred to by his predecessor John Major as “the bastards”. One is reminded of the legendary Croesus, King of Lydia, in Herodotus’s Histories, who was told by the oracle that if he attacked the Persians, he would destroy a great empire. Unfortunately, his emissaries did not ask which empire, and it was his own that was destroyed.
Cameron was not trying to destroy an empire, merely a disruptive Eurosceptical force that turns out to have been quite effective in damaging this country.
And where does the prospective Labour prime minister stand? In a recent interview with the Financial Times, the EU’s impressive negotiator during the Brexit fiasco, Michel Barnier, said he thought Starmer was “a European like me”. But Barnier made it pretty clear, politely, that Starmer’s present position – remaining outside the single market and customs union – was not good enough.
