First published in Reaction
This Wednesday the Chancellor, Philip Hammond, will be putting the finishing touches to his Budget. The big decisions will all have been made. Priorities determined, rows had, compromises made. For better or for worse all that is now left to the Chancellor is to fine tune the language and practice his delivery. This Budget, the second of the year, needs to go well. It needs to go well for Mr Hammond personally, and it needs to go well for the Government. The background to the Budget could hardly be more challenging.
Brexit, of course, dominates the political agenda, absorbing time and undermining confidence, but in truth the Chancellor can do little in his Budget about it. It is the domestic agenda and the performance of the economy that will be the focus of the Budget.
Conservatives need to stop wobbling and keep a tight control on borrowing and spending.
Calls for spending are easy, and sometimes popular. This time round many Conservatives, including some Ministers (who should know better) are calling for increases in borrowing to facilitate more spending, especially on housing and health. It is seductive and oh so tempting. ‘Borrowing is so cheap. The UK has a strong credibility so it’s easy to borrow more. Look at Japan – they have enormous borrowing and they are okay. We’ve had years of austerity and it’s time for a break.’ These are just some of the arguments in favour of borrowing and spending more, but they are wrong.
In quick succession the Conservatives have lost two significant electoral tests and this has undermined their confidence in their own ability and sapped their will in seeing difficult policies through. The Brexit referendum remember broke the leadership of the Party and reversed its settled policy of membership of the EU, which the vast majority of Conservative MPs did, and indeed do privately, support. This traumatic event was swiftly followed by not winning outright a General Election. Both these electoral tests were unnecessary – unsought by the electorate at large – thereby making the results all the more difficult for Conservative MPs to understand. It would be a fatal error of political judgement if these two missteps were compounded by a third – the idea that increasing borrowing and spending is the answer to any problem the Government and the Conservative Party now faces.
The UK’s National Debt is the largest, by far, it has ever been. Paying the interest on the debt is now the fifth largest expenditure the Government has. To increase this enormous burden still further would be political folly of the highest order. Spending more in and of itself will win the Government no new friends and will serve only to undermine its credibility and confidence in its resolve to manage the public finances well.
Ministers need to focus on delivering a faster pace of innovation, reform and renewal in their departments. Conservative MPs need to encourage their Ministerial colleagues to take the tough decisions and deliver real reform. Attracting private sector investment, not increasing borrowing, is the key to unlocking a flow of increased investment into the public sector.
Conservative Ministers and MPs alike need to stop the wobbling and support the Chancellor in keeping a tight rein on public expenditure. If they do not, if the borrowers and spenders prevail, then it will not only be the Chancellor that has to worry about losing office.