We often complain that politicians are unwilling to give straight and unambiguous answers. Last week we saw something different: the government was very clear that Friday’s statement to the House of Commons by the new chancellor, Kwasi Kwarteng, was not—repeat, not—a budget. The name of the so-called fiscal statement, “the Growth Plan”, had a faint whiff of the Soviet Union about it, but the similarities end there. This was an unequivocal split from the previous economic regime and, at the very least, would be a shock to the system.
Whatever it was called, it was a set of financial and economic proposals of breathtaking scope and ambition.
Kwarteng, a big man with a booming voice and a certain intellectual swagger about him made an impact. Among the measures, including cancelling the planned rise in National Insurance, was a pledge to abolish the top rate of income tax, meaning the highest earners – anyone bringing in over £150,000 – will pay 40p on the pound. A planned increase in corporation tax fell to Kwarteng’s free-market sword.
The gamble is on the appetite of the Conservative faithful. Was the abundance of the red meat enough to wet their appetite and satiate fears of economic doom?
All in all, it was a bonfire of taxation, with the Treasury aiming to leave around £45bn in taxpayers’ pockets rather than collected for Whitehall’s coffers. That kind of financial self-abnegation on the part of the chancellor is likely to be at least superficially popular. Bluntly, voters will have more money remaining in their pockets or bank accounts.
Yet the business of government must be paid for.
It doesn’t take a genius to note that this will lead to higher government borrowing. A point made by Rachel Reeves, repeatedly. The government is betting, or sincerely hoping, that its wide-ranging tax cuts will stimulate the economy and generate higher revenues anyway. A policy known, rather bathetically, as “growing the pie”. As an additional insurance policy, Kwarteng talked gravely of “making difficult decisions”, which is long-established Westminster code for something which seems insanely unwise but is supposed to come good at some point in the future.
In 18 months time, little else will matter than whether or not the plan for growth has paid off. And if the somewhat twitchy owners of government debt will hold firm.
Voters will, we need to be honest with ourselves, pay limited attention to the intricate economic measures and counter-measures of the Growth Plan. In essence it rehearses again a very old political argument, which is that giving money back to voters (or rather, not taking it away in the first place) buys their votes.
Rab Butler seemed to think it was true. His April 1955 budget contained a significant cut in income tax; the following month, the new prime minister, Sir Anthony Eden, called a general election and was returned with a larger majority. Four years later, Derrick Heathcoat-Amory, one of the nation’s more anonymous chancellors, produced more cuts in income tax and purchase tax, and the Conservatives won a majority bigger still in the autumn election.
Roy Jenkins, by contrast, insisted that the voters were not so cheaply won. With characteristic loftiness, his April 1970 budget eschewed dramatic headline cuts in taxation, and the chancellor even warned “there are dangers for the country in the present situation.” This was treating the voters as adults who understood life. That June, they tipped the Labour government out of office.
So there seems to be some empirical evidence that voters—you, me, every one of us—really can be bought for a few gewgaws and a puff of smoke. Have Kwarteng and the prime minister made a shrewd electoral move? Will this see fortunes begin to run in the Conservatives’ direction again? It is possible. But there are enormous underlying challenges in the economy, not least of which is high and rising inflation. Downing Street must dread seeing those numbers begin to climb again.
I wonder, too, if the electorate is just a bit wiser nowadays. We are more cynical, less easily impressed. Apart from anything else, we don’t rate our politicians very highly on their ability to manage the economy under any circumstances, let alone perform elaborate acts of financial prestidigitation. Perhaps, after all the bells and whistles, we shall be left echoing the immortal words of President George W. Bush: “Fool me once, shame on—shame on you. Fool me—you can’t get fooled again.”