STEPHEN GLOVER: I take my hat off to Jeremy Hunt’s ingenuity. Let’s hope it hasn’t come too late to save us from Keir Starmer
There are three major opportunities for the Tories before the election. One is the party manifesto, which will be published before voters go to the polls, almost certainly in the autumn. It must show clear blue water between Conservatives and Labour.
Another chance for the Tories to lay out their pre-election wares will be the Budget next March. The danger is that any tax cuts that may then be delivered could come too late to influence the outcome of the election.
Yesterday’s Autumn Statement was the first of these three opportunities. In a way it’s the most important since, with around a year remaining until voters make their choice, the Chancellor still has time to change the political weather.
How did Jeremy Hunt do? Not badly. It was a very clever package. Mr Hunt is a master of detail, and has thought deeply and creatively about measures — all 110 of them — to help businesses and stimulate growth.
My first thought, in listening to him, is that it’s a pity the Tories didn’t come up with so many business-friendly ideas after their thumping election victory in 2019, when they had five years to see their policies bear fruit. But we are, as they say, where we are. To be fair, the pandemic clouded many minds.
Mr Hunt is a master of detail, and has thought deeply and creatively about measures — all 110 of them — to help businesses and stimulate growth
My second thought sprung from the first. Is it likely that any of these imaginative measures will have an impact on the economy, or even be noticed by most people, before we make our way to the polling stations?
I suppose a few of them might. Small businesses will welcome measures aimed at speeding up the payment of invoices. The trouble is that they won’t take effect until April 2024. That is true of almost all the changes announced by Mr Hunt.
Full expensing — which allows companies to deduct spending on new machinery and equipment from profits — becomes permanent, though the famously unreliable Office for Budget Responsibility (OBR) doesn’t forecast any immediate economic uplift. New investment in artificial intelligence centres is also welcome, but these will take years to build.
The Chancellor claimed that all his measures will increase business investment in the UK economy by around £20 billion a year within a decade. Wonderful, if true. Unfortunately, a decade is a long time away. In ten years Mr Hunt may be relaxing on a sunbed in Puerto Rico. And where will the Tories be?
It’s interesting, by the way, that the OBR doesn’t appear to believe that the Chancellor’s clever ideas will give much of a boost to the economy. It has cut its growth forecast to a measly 0.7 per cent for next year and 1.4 per cent for 2025. By 2028 it predicts we might achieve the dizzy heights of 1.7 per cent growth.
The Chancellor claimed that all his measures will increase business investment in the UK economy by around £20 billion a year within a decade
Still, who believes the OBR? Possibly not Mr Hunt, who mentioned in his statement that Whitehall’s very own Mystic Meg had forecast last autumn that the economy would shrink by 1.4 per cent in 2023. In fact, it has grown, albeit only slightly.
I shan’t forget that, back in March, the OBR reckoned inflation would fall to 2.9 per cent by the end of this year. Such a prediction seemed crazily optimistic at the time. The inflation rate was 4.6 per cent in the 12 months to October, and few think it’s likely to drop below 4 per cent by next month.
Even if the OBR chooses to rain on Mr Hunt’s parade, and doesn’t think his growth measures amount to much, I take my hat off to him, and salute his ingenuity. His welfare reforms, which aim to get 200,000 people claiming benefits off the sick list by 2028, are also welcome.
My only worry is that everything he announced by way of business reform will have a minimal effect before the election, and may well not be taken on board by voters.
In many respects the Chancellor’s statement, insofar as it concerned business, put the long-term interests of the country in front of the short-term interests of his party. He was attempting to plan ahead.
Mr Hunt mentioned in his statement that Whitehall’s very own Mystic Meg had forecast last autumn that the economy would shrink by 1.4 per cent in 2023
But Mr Hunt is not a fool, and when he addressed the question of tax cuts — which he had ruled out only weeks ago — election day evidently loomed large in his calculations.
The reduction of the main rate of National Insurance from 12 per cent to 10 per cent was twice what had been predicted. It will benefit 27 million people. And whereas the self-employed will have to wait until next April to see the abolition of their Class 2 National Insurance payments, those on PAYE will see the benefit in early January.
A person on an average salary of £35,000 will save over £450 a year, according to Mr Hunt. An average nurse will keep an extra £520 over 12 months, while a typical police officer will be £630 better off. These are significant figures. People will notice.
Will the cut be large enough to dispel the widespread belief that the Tories have become the high-tax party? A recent opinion poll produced the incredible finding that more voters now associate Rishi Sunak’s party with high taxes than they do Sir Keir Starmer’s. Will this now change?
It’s impossible to be sure. I suspect people will realise that what Mr Hunt is handing back by way of cuts in National Insurance, he is more than making up by freezing income tax thresholds. In fact, he is giving away some £10 billion a year on the one hand while pocketing more than £40 billion on the other.
The reduction of the main rate of National Insurance from 12 per cent to 10 per cent was twice what had been predicted
A recent opinion poll produced the incredible finding that more voters now associate Rishi Sunak’s party with high taxes than they do Sir Keir Starmer’s
In other words, although I applaud the Chancellor’s belated embrace of lower taxes, it’s impossible not to fear that they have come too little, too late. Despite his and Rishi Sunak’s new talk of the joys of low taxation, Britain remains a very highly taxed country by its historic standards.
According to the OBR — I know I shouldn’t quote them, but they are the Government’s official forecaster — taxation will reach a new post-war high of nearly 38 per cent of GDP by 2029. Despite the reductions on National Insurance, tax is predicted to continue rising.
And that is under current Tory plans. Can anyone sensible doubt that it would be far worse under Labour? I’m afraid that those who think Labour eschews high taxes are seriously misguided. A quick look at history confirms as much.
Labour governments almost always overspend and raise taxes. Every Labour administration since the war has increased tax as a proportion of GDP. And so, of course, have the Tories since 2019, though they claim this was largely or wholly the consequence of the pandemic and the energy crisis.
This is the irony of our situation. The Tories are desperately trying to portray themselves in a new light. They have left it very late, and I’m afraid that last-minute tax cuts in next March’s Budget would be unlikely to have the desired effect in the few months that will remain before the election.
I hope I’m wrong. I really do. For if I’m right, we are about to exchange a party that has stumbled carelessly towards record high taxes for one that profoundly believes in them.
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