The first response to today’s Autumn Statement was, inevitably, bewilderment. Liz Truss’s “new era” of going for growth came and went in the blink of an eye and now we’re back in the austerity zone. Torsten Bell, my good friend at the Resolution Foundation, spoke for all the spun heads in the economics crowd when he aired disbelief at how we had veered “from ‘it’s time for biggest tax cuts in 50 years’ to ‘inevitably time for the biggest fiscal tightening since 2010’” in the space of just a few weeks.
But I want to argue instead that the more things change, the more they stay the same. Just as, in grasping the essentials of Tudor history, it is a mistake to be unduly detained by the nine-day reign of Lady Jane Grey, I’d suggest that to make sense of this week’s Autumn Statement, the right starting point is to imagine that Liz Truss never happened.
After all, she was never the pick of elected Conservative MPs but the product of an ageing and self-appointed Conservative selectorate with a weakness for faith-based tax-cutting. After she collided with reality, power passed straight back to the more mainstream figure who had been running the economy for two and a half years before the Conservatives had a nervous breakdown this summer. Rishi Sunak is now restored to the helm, even more firmly in charge than he was before he rudely interrupted himself in July, when Boris Johnson’s chaos reached such a pitch that he felt forced to resign.
Labour’s hesitancy about launching a full-throated attack on the fundamentals of the government’s new plan might make it seem like consensual stuff. So, too, does chancellor Jeremy Hunt’s recruitment of a couple of figures associated with the New Labour era—roping in Patricia Hewitt to look into issues on health and care, and Michael Barber, the one-time head of Tony Blair’s “Delivery Unit”, to look at skills.
“Mainstream”, however, does not mean moderate. The mainstream Conservative figures of David Cameron and George Osborne presided over welfare “reforms” that unleashed a tsunami of hardship, by—as independent studies have confirmed—hitting millions of the poorest Britons for thousands of pounds a year.
The spin from Sunak and Hunt, who on Wednesday spoke in the tones of a concerned vicar, is that their “consolidation” will be more “balanced”, less like the 80:20 mix of spending cuts to tax rises favoured by Osborne, and more like the 50:50 mix chosen by John Major and his chancellor Ken Clarke as they steered Britain back from the wilder shores of Thatcherite excess. On the face of it, the numbers pre-briefed to the BBC lent some support to this characterisation, with £30bn in spending cuts to be (almost) balanced by £24bn in tax rises.
But put the 49-day Truss interruption out of your mind, and you can immediately see that this spin is misleading. While Hunt reversed most of the tax cuts in Truss’s disastrous mini-Budget, he freely chose to leave the biggest of the lot in place, the cancellation of the “health and social care” National Insurance levy which, not long ago, Johnson and Sunak had judged as indispensable to saving the ravaged post-Covid NHS.
Hunt and Sunak are thereby foregoing an annual £18bn in revenue by the end of the forecast period. Admittedly, the pair are also clawing some cash back by freezing certain thresholds to which, as chancellor, Sunak had conceded rises, to quieten the anti-tax Tory backbench. But against a baseline including the then-chancellor’s full original health and care levy plan, taxes would not be rising by £24bn, but only by £6bn.
Set that against the £30bn in spending cuts, and Austerity 2.0 suddenly looks almost as unbalanced as the Osbornite original. And even if the looming retrenchment is not quite as dramatic as some had feared, soothing comparisons with the fiscal tightening envisaged by Gordon Brown and Alastair Darling after 2008 are wide of the mark, because the starting point is so different. Squeezing public services is today far more dangerous than it was when the cold steel was first flashed—because they are already down to the bone.
You don’t have to take my word for that; Hunt himself—who was previously the longest-serving health secretary in history—recently admitted that the NHS was on the brink of collapse. And the Conservative leaders of Kent and Hampshire county councils have this week warned they could go bankrupt within a year.
I don’t dispute that the public finances are shot (though we should note that, after the Truss debacle, government borrowing costs rapidly fell back to their previous levels). I’ll leave it to others to argue today about the wisdom of announcing so much belt-tightening at a point when, as Hunt reported, the official bean-counters already judge the economy to be in recession.
But it is worth underlining how many fateful and arbitrary judgments are buried in the reassuringly dull and technical talk about fiscal rules. Whatever the economics, Hunt’s decision today to target falling debt over a five-year rather than a three-year horizon serves the clear political purpose of pushing the deepest spending cuts well into the first term of an expected Labour government. Big consequences also flow from haphazard decisions about how spending is classified. If, for example, all education spending were classified as an “investment” in the earning power of the next generation, rather than as a consumption cost, it could never have been cut so deeply over the 2010s. As it is, spend per pupil will not have advanced over 15 years.
But you would never have guessed the sustained neglect many such services have endured as you listened to Hunt putting various temporary £1bn or £2bn or £3bn sticking plasters over schools, hospitals and town halls. The cleverness of today’s performance was to strike a consensual note while pressing on with divisive things. An eye-catching move to tax a few windfall profits over here, and a reassuring tone on protecting cash settlements over there—without leaving time for his audience to notice the absurdity. Are we supposed to imagine exhausted public servants can truly make “efficiencies” on a scale that will compensate for the 11 per cent inflation which is currently burning through their wage packets and all the other resources they use?
The public relations was flawless. But make no mistake: the upshot will be a new era of public squalor.
