In the run-up to Budgets and fiscal statements, chancellors always face a barrage of helpful advice from all sides, as though the answers that have eluded them can be found down the back of the Treasury sofa. This is as it should be – politics is not so much a spectator sport as a backseat driving contest – and most of it can be ignored. But the advice on offer from the opposition party is always worth paying attention to, even if it’s unlikely to provide Rachel Reeves any last-minute ideas for untangling herself from the mess her fiscal rules have got her into.
It is notable that those fiscal rules – Reeves’s self-imposed straitjacket not to increase borrowing, which many Labour MPs wish she could be a bit more flexible on – didn’t get a mention in Jeremy Hunt’s big what-I-would-do-if-I-were-still-chancellor column in the Sunday Times last weekend. Instead, Hunt has miraculously solved the headache that is the UK economy with a raft of policies seemingly so straightforward one wonders why he and Rishi Sunak ever struggled. (Hunt’s pre-emptive defence is that he has more time to think in opposition.)
These mainly include reforms of the welfare system that go far beyond what the Work and Pensions Secretary Liz Kendall announced last week, and trying (as literally every government does) to make the government operate more efficiently. (“You don’t need Elon Musk’s chainsaw to admire his ambition,” Hunt writes after discussing how new technology can drive government productivity savings. Presumably he doesn’t mean switching official comms to Signal.) He reckons these two combined would save a cool £50bn.
Hunt offers all this as a friendly observer. He will not be providing the official opposition response to the Spring Statement tomorrow – that honour will go to the shadow chancellor Mel Stride. It will be interesting to see how much Stride leans into the recommendations of the last Conservative chancellor (Hunt claims many of his suggestions were things the Tories were planning when they were kicked out of office), and how much he seeks to distance the party from the last government. That, after all, has been Kemi Badenoch’s main strategy so far as leader, with her frequent references to “mistakes” made by her party (crucially, never by Badenoch herself) intended to convey that the Conservatives have changed.
Badenoch has been laying the groundwork for the Tories’ Spring Statement response for some weeks now by repeatedly referring to it as an “emergency Budget” – an attempt to make the government look chaotic and out of control simply for holding the twice-yearly fiscal event. But in terms of actual economic policy, the Tory leader comes up short. She knows what she doesn’t like from Labour’s first Budget since 2010 – VAT on private schools, changing inheritance tax rules for farmers, increasing employers’ National Insurance contributions (NICs) – but has been very quiet on how she’d raise the money instead. As Keir Starmer likes to flag, there is some confusion within the Conservative Party about whether, for example, they would reverse the employers’ NIC increase.
This puts Stride in a tricky position. Interviewed on Sky in the lead-up to the Spring Statement, the shadow chancellor leaned heavily on the “emergency Budget” line, but had little else – and couldn’t explain how the Tories’ proposed welfare changes would raise more than Labour’s.
Stride and Badenoch have another problem, one that can be spelled with five letters: Truss. Stride did not look happy when Trevor Phillips brought up the “the Truss Budget” as one of the mistakes the Conservatives need to own. “I had a lot to say about it before it happened, when it happened and since it happened,” he responded, citing his role chairing the Treasury Select Committee at the time, then proceeded to avoid saying any more about it, beyond the fact that the Conservatives would never repeat it.
If Stride thought he could get away with that without an intervention from Liz Truss herself, he was sadly mistaken. The former PM popped up to defend her mini-Budget, warning that if the Tories don’t return to the measures she suggested, “those who abandoned the party in 2024 will not return and the party will not get the chance to revive the British economy”.
The Liz Truss legacy lives on beyond Twitter too, even if its architect lost her seat in July. Yet more helpful advice, ostensibly for the government but possibly targeted more at the Conservatives, arrived on Monday in the form of a Spring Statement briefing from the Growth Commission – an organisation of Truss-friendly economists assembled after she left office. Its recommendations might sound familiar. They include unfreezing income tax thresholds, bringing back preferential tax treatment for nom-doms, and cutting corporation tax to the US level of 21 per cent.
“Currently the UK is facing a major net outflow of ‘millionaires’,” the report reads. “This gives a staggering loss of tax of £4.3 billion a year for one year’s migration, but if it were to continue at the same pace for the rest of the life of the current government, the annual loss would build up to about £18-23 billion. Stopping this and indeed turning it round would transform tax revenues.” A set of fiscal recommendations based on cutting tax for millionaires to drive growth? Stop me if you’ve heard this one before. Notably, there is nothing in the report about fiscal rules.
As I have mentioned before, Badenoch doesn’t seem sure what to do about the Truss problem. While she is happy to decry the legacy of other recent Conservative prime ministers (Theresa May’s net zero legislation is a major target), Truss gets a free pass. Badenoch likes to reiterate that the Conservative Party is “under new management” (something she repeated on TalkTV this morning in one of her relatively few broadcast interviews), but never wants to talk about the seven-week period that is, in many voters’ minds, the biggest reason why new management – of the party and the country – is so necessary.
It’s a near-impossible needle for Stride to thread tomorrow when he responds to Reeves. He knows full well the damage Truss did to both the British economy and to his party’s reputation. But he can’t admit that, not while the leader of his party is going for a strategy for Truss ambivalence. On the other hand, if he appears to offer easy solutions, like Hunt has done, he risks the accusation that his party had 14 years to attempt them and manifestly failed. You can see why the Tories are clinging so hard to the “emergency Budget” line. Like Reeves and her spending cuts, they have backed themselves into a corner with nowhere to go.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
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