Politics

This Budget showed the Tories preparing for defeat, not victory

3 November 2018

9:00 AM

3 November 2018

9:00 AM

There’s a spectre haunting the Tories — the spectre of 1997. Tories fear that history could be about to repeat itself. That after several years in office, they spend a parliamentary term arguing about Europe and plotting against their weak leader with the result that Labour wins the next election by a handsome margin.

Back then, the Tories left Labour with a ‘golden inheritance’. John Major’s government had done the responsible thing on the economy. It had pared down the deficit, even putting VAT on domestic fuel in an attempt to help balance the books. But the party’s reward for this was its worst defeat since universal suffrage was introduced. Even more galling was Labour’s decision to use the money saved by the Tories to increase spending on health and education in the run-up to the next general election in 2001, which Labour won by another mammoth margin.

In the weeks straight after the 2017 election, Patrick McLoughlin — then the Conservative party chairman — began to remind colleagues what had happened in the 1990s. He argued that there was little point in the Tories going through the pain of balancing the books only to leave Labour with more money to spend. His arguments resonated with Tory colleagues, particularly Theresa May’s new chief of staff, Gavin Barwell.

Monday’s Budget marked the moment when the Tories adopted this position and abandoned any serious efforts to balance the books. They now want to spend before Labour gets the chance to do so because they have no intention of making life easy for an incoming Corbyn government. So virtually all of the additional money from better than expected tax receipts was used: a party which believed that deficit reduction was the national priority would not have done that.


Despite this, the Tories also avoided increasing taxes to pay for the extra spending on the NHS. Philip Hammond appeared to draw a new dividing line with Labour when he declared: ‘My idea of ending austerity does not involve increasing people’s tax bills.’ This was the strongest hint yet that the Tories will fight the election on a ‘no new taxes’ pledge. One cabinet minister, who isn’t afraid to be critical of the Chancellor, says — approvingly — that this distinction was ‘Osbornesque’.

For the more fiscally conservative members of cabinet, the great achievement of this Budget was the fact that it included no new personal tax rises — that there won’t, as many expected, be an extra penny on National Insurance to pay for the increased NHS spending. As one of them says: ‘Six months ago, we were talking about which taxes we should raise. Now, we’re talking about how we should do tax cuts.’ The fact that even John McDonnell has felt obliged to embrace the increase in the higher rate tax threshold shows just how politically potent tax cuts still are.

The new Tory approach to spending is even more political than just an attempt to deny a future Corbyn government money. Influential Tories believe that an important moment in the next election campaign will be when the markets start seriously examining the implications of Labour’s spending commitments. One well placed government source recently told me that if the Tories had balanced the books, the markets might be more relaxed about the sheer size of Corbyn’s spending commitments. But if the country was still running a deficit, albeit a mild one, there would be more nervousness about Labour’s spending splurge.

The big difference between now and 1997 is that Jeremy Corbyn is not Tony Blair. It is hard to imagine Labour promising to copy Tory spending plans as Blair and Gordon Brown did before that election. But Corbyn also brings out the Tories’ most tribal instincts. In the 1990s, many Tories regarded Blair as a kind of compliment, proof that they had forced Labour to accept the Thatcher settlement. Margaret Thatcher herself once called New Labour her greatest achievement. Back then, some Tories thought the party would benefit from a spell in opposition, and the country wouldn’t come to much harm under Blair.

Corbyn, however, represents a return to a kind of politics that the Tories thought they had banished for good in the 1980s. No Tory can be relaxed about the prospect of five years of Corbyn as prime minister. Even very pro-EU Tories don’t regard a Corbyn government as a price worth paying to stop Brexit.

Corbyn and the damage he would do to Britain’s economy and national security mean that the Tories find it easy to believe that their party’s interest is the same as the national interest. At a post-Budget meeting with Tory MPs, Hammond said that he was a fiscal conservative but if a bit of extra spending was what was needed to stop Corbyn, it was clearly worth it. Equally, when Theresa May recently addressed Tory backbenchers about Brexit, she warned them about the dangers of a Corbyn government. The implicit message was that whatever their doubts about the deal, they risked putting Corbyn into power if it was rejected.

May’s strategy for getting her Brexit deal through will rely on MPs’ fears of both Corbyn and no deal. It will be hard to portray the withdrawal agreement as some great diplomatic triumph; instead, Mrs May will concentrate on the unpalatable alternatives. At the same time, she will point to the political declaration, which will set out the basis for future UK/EU relations. I am told that this declaration contains better than expected language on both financial services and data, suggesting that the trade deal will be more comprehensive on services than anticipated. May will cite this declaration as evidence that the UK and the EU will be able to negotiate a trade deal and so the backstop won’t be needed. Though, as one cabinet minister is quick to point out to me, the political declaration is not — unlike the withdrawal agreement — legally binding.

May’s approach might succeed. Worries in government about no deal are growing. One source tells me: ‘The more we see on no deal, the worse it gets.’ But if May’s tactics work in the short term, they might backfire in the medium term. She might be able to convince her cabinet and most of her MPs to support the deal for fear of the alternatives — but there will be buyer’s remorse once it is through.

Subscribe to The Spectator Australia today for a quality of argument not found in any other publication. Subscribe – Try a month free


Show comments
Close