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Tuesday, Mar 21, 2023

With the UK economy in freefall, Rishi Sunak clings to a fracturing Tory coalition

With the UK economy in freefall, Rishi Sunak clings to a fracturing Tory coalition

The UK prime minister has delayed the worst of his spending cuts to try to keep new Tory voters on side.

It had been billed as Austerity 2.0.

But the £55 billion package of tax rises and spending cuts unveiled by U.K. Prime Minister Rishi Sunak and Chancellor Jeremy Hunt on Thursday tried to delay the pain where possible, for as long as they could.

In a sense the pair had little choice — Brits are already facing the biggest drop in living standards on record next year as inflation, energy bills and borrowing costs soar. Hunt said Thursday evening that by delaying the worst of the cuts beyond the next election — currently expected in 2024 — he aimed to “make sure this recession is shallower, and hurts people less.”

Taxes will still rise quickly, on businesses and individuals.

But by finding extra billions for the National Health Service, schools and key government departments in the short-term, and by hiking pensions, welfare and the minimum wage in line with sky-high inflation, Hunt and Sunak hope to give themselves a fighting chance of keeping a disparate and unhappy collection of Tory voters on side.

“It suggests they are not willing to completely abandon any hope of holding together their electoral coalition,” said Rachel Wolf, director of public opinion consultancy Public First, and co-author of the 2019 Conservative Party manifesto.

Loosely summarized, the election-winning strategy pulled off by Boris Johnson — and masterminded by his former top aide Dominic Cummings — in 2019 was to retain traditional Conservative strongholds in the South while also attracting millions of first-time Tory voters in more deprived areas in the North and Midlands.

Members of Sunak’s failed leadership campaign over the summer noted grimly that he played far better among the former group, drawing crowds in the affluent shires and southern towns.

But with Thursday’s autumn statement, Sunak showed he still aspires to keep the whole of Johnson’s coalition in place. As Wolf put it: “The new Conservative voters are very, very dependent on public services, and it was a big part of what they voted for.”

Sunak had already signaled his intention to return to the winning Johnson formula of 2019 following the radical, short-lived tenure of his predecessor Liz Truss.

“I will deliver on its promise,” Sunak said of the 2019 manifesto, in his first speech outside No. 10 Downing Street. “A stronger NHS. Better schools. Safer streets.”

He also recommitted to “leveling up” — Johnson’s somewhat amorphous domestic offer, aimed at tackling deeply ingrained regional inequality through targeted investment and new infrastructure.

Adam Hawksbee, director of the center-right Onward think tank, insisted the government could still deliver tangible improvements for deprived communities, such as tackling anti-social behavior and cleaning up graffiti, even as other spending cuts bite. “Rishi’s going to have to do that if he wants to keep those new 2019 voters,” he said.

Hawksbee added that by reappointing Michael Gove as leveling up secretary and hiring Onward’s previous director, Will Tanner, Sunak had built a team at No. 10 that is “really serious about delivering this agenda.”

Delaying the pain

It was not a foregone conclusion that Sunak would do so.

As chancellor, he often acted as a brake on Johnson’s more expensive ambitions, and many had expected Thursday’s statement to include immediate spending cuts reminiscent of the “austerity” era under David Cameron and George Osborne.

Instead, the anticipated cuts were delayed until the mid-2020s, when public spending increases will be limited to 1 percent, down from a planned 3.7 percent.

But even where public services are not cut, they will be squeezed.

“The demand for those services is substantial,” said Ben Zaranko of the Institute for Fiscal Studies, a respected economic think tank, “and in some cases has been increased by the pandemic and the cost-of-living crisis. At the same time what the government is asking for, from the NHS and the justice system — none of that is being scaled back.”

This has its own electoral implications. Strained public services combined with higher energy prices, inflation and mortgage rates will hit millions of people hard over the next two years. Tories fear the blame is likely to be laid at the government’s feet.

A somber briefing by the Office for Budget Responsibility (OBR) published alongside Thursday’s statement predicted average living standards for U.K. citizens will fall 7 per cent over the two financial years, wiping out the previous eight years’ growth.

“The problem is going to be that everything feels worse,” Wolf said “There may be more money in the NHS, but people can’t get an ambulance, and they can’t see their GP and people feel like crime is going up.”

Similarly, flagship offerings to the so-called “Red Wall” of Northern voters may have been retained, but look unlikely to deliver in full. Promises of new rail infrastructure between Northern cities have been steadily watered down. A commitment to continue with the current round of “leveling up” funding came without mention of once-expected subsequent rounds of cash.

Whitehall insiders concede that Gove’s 12 “missions” for leveling up now appear unreachable, following an internal review requested by No. 10.

In search of Sunakism

With the grand Johnsonian vision unlikely ever to be delivered given the disastrous economic climate, some Tory MPs question what Sunak really has to offer beyond a basic air of competence and a certain PR sheen.

Certainly the nature of the summer leadership contest, which effectively became a battle between Sunak and Truss over sound money and lower taxes, left little space for Sunak to set out a wider agenda.

Those who know him well insist he has a broad powerful vision for the U.K.’s economic future — but accept it has yet to register with voters at all.

“Innovation policy has been a key part of what he considers to be his ideology,” said Dom Hallas, executive director of startup lobby group Coadec, who worked closely with Sunak when he was chancellor. “He comes back to it time and again.”

Hallas also noted his youthful tech-savvy, adding: “People mock the fact he wears a hoodie, but he is in his early 40s, he was born in the 1980s … I work with people who dress like that. He inhabits that realm. He isn’t in the stuffy world some people in politics are in. It filters through to his vibe.”

Jimmy McLoughlin, a former Downing Street adviser and friend of Sunak, also attested to his “deep understanding of where industry and the economy is heading, and where the opportunities for growth are.”

But he too acknowledged that while Sunak is “one of the most recognised politicians of the last 20 years, largely because of the very pragmatic response to the pandemic … less is known about what drives him.”

Other Tory figures remain unconvinced. “There’s nothing more to him than meets the eye,” a former party aide said. “He’ll have a short-lived bounce for not being Liz Truss, followed by a year and a half of being hated for the mess we’re in.”

And a former minister under Johnson added: “He is for basic economic competence and good governance, so your path to electoral success is ‘we didn’t screw it up that much’. It’s not that compelling. And it means the coalition is intensely fragile.”

Having tried almost everything apart from boring competence over recent years, the Tory Party may not have much of a choice.


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