19 March 2023

Weekly Briefing: Job done, work to do


From a purely political point of view, it was ‘job done’ for Jeremy Hunt this week. Where other Chancellors have seen their plans unravel the moment they sat down, the reaction to his Budget has so far been pretty low-key.

Combined with a series of recent policy wins – on Northern Ireland, the Channel deal with France and the possibility of a resolution to NHS strikes – it reinforced the impression that Season 5 of ‘Conservative Government’ will steer clear of the blood-on-the-carpet chaos that characterised previous instalments (though fans of high drama can always tune in to Boris Johnson’s Partygate grilling on Wednesday).

The fact that Labour’s response centred on scrapping the pensions lifetime allowance tells its own story. Much as they might like to make this another ‘45p income tax’ moment, no one is buying it – especially when the change is billed as a way to get more doctors back in the NHS workforce. The Opposition’s biggest gripe must be that Hunt stole their clothes with yet another Whitehall intervention in the childcare market, and the extension of an energy price cap that David Cameron once described as ‘Marxist’.

But while there was no shortage of political nous behind Hunt’s announcements, it was hardly a jamboree for those of us who think growth and a restrained state are important.

True, there were good, sensible announcements here: on pensions, nuclear energy and medical tech regulation. More cheering still was the introduction of full expensing – something the Centre for Policy Studies and others have long called for. But that enthusiasm is somewhat tempered by the realisation that next month corporation tax is going up by 31% (or six percentage points). And as Robert put it on this week’s podcast, it’s ‘really stupid’ that full expensing only lasts three years, purely because of pretty arbitrary Treasury spending rules.

What about the offer of 30 hours ‘free’ (ie state-funded) childcare for one and two-year-olds?

On the one hand, childcare is wildly expensive and this may be a way to enable more parents to get back into the workforce at a time when the labour market is ridiculously tight. However, it’s a policy that raises as many questions as it answers: how will supply keep up with inflated demand? Will providers be paid enough to stay afloat? Should the Government really be doling out money to households who can, frankly, afford to pay for childcare anyway?

Personally, however, the most telling moment that really made me sit up was at the beginning of Hunt’s statement. A big cheer rose from the Tory benches as the Chancellor announced that, according to OBR forecasts, the UK ‘will not now enter a technical recession’ this year.

Now, calmness and realism are all well and good, but if the governing party’s MPs are celebrating the economy not shrinking, it’s not just our policies that need recalibrating, but our sense of ambition.

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John Ashmore is Editor of CapX.