‘Where is the money coming from?’ That is a familiar question to hear from broadcasters to politicians. It is also a perfectly valid one. Often, it is almost intended to be a rhetorical one, given that the anticipated answer is so evasive as to lack any substance. So kudos to Mel Stride, the Shadow Chancellor, for making a proper effort, in his speech to the Conservative Conference in Manchester this morning, at getting his numbers to add up.
He set out tax cuts. But also set out £47 billion of spending cuts alongside them.
The Conservatives would abolish business rates on the retail, hospitality and leisure sector – around 250,000 businesses. ‘The relief will allow businesses to pass savings onto consumers, meaning cheaper gym memberships, cheaper meals and cheaper pints for punters,’ Stride declared. ‘It will also help protect and create jobs in the hospitality sector, reversing the decline seen under Labour. 89,000 hospitality workers have lost their jobs since the budget — more than half of all UK job losses.’
He also announced that National Insurance on the first £5,000 of a person’s first job would go to a fund for buying their first home. ‘If you work hard and do the right thing, the Conservative Party is on your side,’ he said.
It should be conceded that £47bn is a modest figure. The breakdown is £23bn from the welfare bill; £8bn by bringing civil servant numbers from 517,000 down to 2016 levels of 384,000; £7bn from a further cut in the overseas aid budget; £3.5bn by ending the use of hotels for asylum seekers; £4bn by ensuring benefits and social housing are reserved for UK nationals; and finally, £1.6bn by scrapping subsidies for heat pumps and electric vehicles – ‘Ed Miliband’s vanity projects’.
Stride claimed that those savings would not all go on tax cuts but also leave room for borrowing to be reduced.
The fundamental message was that being authentically Conservative means a return to fiscal restraint. Under Theresa May, Boris Johnson and Rishi Sunak, we had higher tax, higher borrowing and higher spending. We had a brief interlude with Liz Truss which attempted to bring in lower tax but with even higher borrowing and higher spending. Stride was proposing lower tax, lower borrowing and lower spending.
The criticism is that it is nowhere near enough for the scale of the challenge the nation faces. On Saturday, The Times reported that ‘five thousand people are being signed on to long-term sickness benefits every working day, representing a doubling in incapacity claims under Labour’. The OBR forecasts annual spending on welfare to reach £373.4bn in 2029/30. As the saying goes, £23bn is ‘a rounding error’. Would it really mean a falling welfare budget? Or it merely increasing a little more slowly than it otherwise would?
Helen Whateley, the Shadow Work and Pensions Secretary, lists in the Daily Mail, proposals to tighten up welfare spending by ‘putting a stop to sickness benefits for low-level mental health problems like anxiety’, ‘no more free Motability cars for ADHD and tennis elbow’ and ‘a return to face-to-face assessments and job centre meetings’. Reasonable so far as they go.
But more drastic changes are needed. Why should the sick automatically get higher welfare payments than the able-bodied who are unemployed? The pension age needs to be raised further than currently planned. At the other end of the age scale, the eligibility for Universal Credit must be raised higher than 18, to break the arrangement that school leavers can immediately sign on.
Cutting down the Civil Service is a welcome item. We have 55,800 civil servants in the Ministry of Defence compared to 73,800 regular soldiers in the British Army. Almost a pen pusher for every squaddie.
There is a caveat. Stride offered no proposals to abolish quangos. It may be that you could get rid of a quango and most of its staff and functions, but that some residual role should be continued by a government department with ministerial accountability. If you reduce the number of quangocrats by 100,000 but have 10,000 extra civil servants to continue any genuinely necessary work, that would obviously be a net gain for the taxpayer.
So far as the tax cuts go, the £5,000 to go into a fund for a first home is a bit gimmicky and complicated. Should people not be allowed to choose what to do with their own money? If we want to help first-time buyers wouldn’t a Stamp Duty cut be more straightforward? The other objection is that the problem with the housing market is a lack of supply. Attempts to achieve greater affordability by boosting demand are self-defeating.
Easing business rates for the hospitality trade would be welcome. But rather, ahem, small beer. For us to have a strongly growing economy, far wider and deeper tax cuts are needed – for businesses and for individuals. That would be the reward for a radical programme of spending cuts.
At least in his speech this morning, Stride has broken the taboo that spending cuts are ‘impossible’. His rhetoric showed clear ambition for the country to take a free enterprise direction. ‘The vicious cycle of more spending, more taxes, more borrowing, more debt can be broken’, he told the Conference. ‘Conservative values of sound money, low taxes, entrepreneurship and hard work that can make that happen.’
The initial proposals end the taunt the Conservatives face from the media and their political opponents that they have no policies.
Some will point out that Stride has been among the more reluctant to criticise the tax-raising record of the Conservatives in office. However, given Kemi Badenoch has made party unity a priority, it may be helpful that it is Stride who has set out a change in direction.
We have had a statement of intent. Some initial indicators of what the Conservatives will offer the electorate at the next election. A lot more is needed. But it would be churlish to dismiss this beginning of the restoration of the true Conservative mission.
