If you listen to the sober-sided, serious economists at the Institute for Fiscal Studies, or to the Chancellor Philip Hammond himself, you’d think the Conservative leadership election is a horrible bidding war of doolally spending promises from Jeremy Hunt and Boris Johnson. Has the party of sound money lost its soul? Betrayed its heritage? Are Margaret Thatcher and Milton Friedman spinning in their graves as leadership contenders try to out-Corbyn each other with unaffordable spending promises?
Well no, not really. I can’t speak for Boris Johnson but, as someone who’s been involved in a lot of Jeremy Hunt’s policy development work, that’s not what we’re doing at all.
Let’s start with the charge that, if it was right to introduce austerity in 2010, we should do the same for Brexit in 2019. Otherwise we aren’t being consistent.
But the problem in 2019 isn’t the same as 2010. Brexit isn’t the banking crisis, thank goodness. And if the problem is different, the answers should be too.
By 2010, Gordon Brown was trying to keep the economy going with huge increases in public spending, paid for with ballooning debt. Something like one pound in every four the Government spent had to be borrowed, to be repaid by taxpayers later. If we’d carried on like that, pretty soon the country’s credit card would have been snipped up and the bailiffs would have been knocking at the door. So we simply had to throttle back, to stop spending money we hadn’t got.
But today is different. Public spending isn’t ballooning and borrowing is under control. We’re living within our means, and there’s even headroom for a bit more spending if we’re careful. We’ve come a long way, and it hasn’t been easy. You can understand why Hammond doesn’t want the next Prime Minister to blow it.
What are today’s problems, if they’re different from 2010? The biggest is that some – although certainly not all – firms are putting off growth-creating investments until after the Brexit fog has cleared. And that no-one knows whether our trade with the EU will be easy or awful once we’ve left.
So it makes sense to spend a bit of money to promote economic growth. Post-Brexit Britain needs a stronger, more dynamic, more energetic, turbocharged economy, so we’re prepared for the challenges of life outside the EU. And Jeremy Hunt’s plans to cut corporation tax to 12 and a half per cent, increase investment allowances and exempt small high street firms from business rates would do exactly that. They would spark economic renewal and investment in UKplc, making us more resilient in economic shocks and recessions, and more productive and efficient so we can grow faster too.
In other words, it’s OK to use different answers in 2019 than in 2010. But what about the charge that we’re making the same mistake as Brown, by spending and borrowing unaffordably?
Hunt is on pretty firm ground here, because he agrees we’ve got to keep the national debt falling relative to the size of our economy. That means borrowing can’t balloon, and we’ll always be able to repay our debts. And his business career helps here too, because his plans to turbocharge post-Brexit Britain’s economy would mean we’d be investing to grow. They’re sensible investments in our economic future, not pale copies of unworkable, hard-left Corbynomic plans.
Nor is he expecting to do everything at once. We’d need to raise defence spending progressively over five years, for example, to allow time to plan. Otherwise you’d simply waste money on the wrong things.
The same goes for fixing illiteracy. That will take ten years, building on the huge progress over the last decade that has seen more pupils being taught in good or outstanding schools than ever before.
And some of the plans would only be temporary, too. The pledge to help farmers adjust to a post-Brexit world has to be a hard-headed, short term plan to help re-equip machinery, buildings and breeding for new global markets, for example. Not a woolly, open-ended subsidy.
The plans have got to be about changing things, so we’re ready for a new world. Not expensively preserving the way they were before we voted to leave. Transformation and preparation, not status quo. But, for Hunt’s proposals at least, they are sound, practical, affordable ideas. And, most important of all, they’re thoroughly Conservative too.