Chancellor Rishi Sunak stood at the podium last week during his virtual conference speech and paid tribute to George Osborne, Philip Hammond and (presumably for form’s sake) Sajid Javid for their work. His message was clear – it is because of their work that the Government is able to take the action it is now to safeguard the economy, incomes and businesses. And when we are out of the current emergency, he will have to do the same as them.
I am no longer in the business of drafting speeches for Conservative Conference. (In fairness, David Gauke, my former boss, liked significantly to write his own – and I’m not sure many in this Government would be in the business of accepting wording crafted by me.) But this is certainly text with which I can associate.
On 13 May, I wrote in these pages that “Former Chancellor George Osborne has been vindicated – it is only because the post-2010 Governments did fix the roof while the sun was shining that the situation is not even worse.” I can only assume someone in No 11 took note.
If the Chancellor’s team noted that text, they will already have been painfully aware of what I then wrote – that a further bout of austerity along the lines of 2010 and after is near impossible to replicate. There are some small savings that can be made from public spending – I noted the public sector pay bill as an option. Readers also suggested cutting overseas aid and liquidating the BBC, and I considered both of these on 1 July. I don’t really think these are that sensible given the amount of pain they would generate for the very low level of return – but I concede that some cutting will have to be made, and none of it will be controversy-free.
Nor will the tax rises that will inevitably come. Barely a day goes by now without some innumerate tribune of the populist right proclaiming that it would be lunacy to raise taxes. The recent release by the Centre of Policy Studies and the Tax Foundation of a study saying that any increase in taxes would damage the UK’s tax competitiveness is a case in point.
I have no issue with that report’s contention that now is not the time to raise taxes – that is pretty much received wisdom, and I’d be very surprised if the Treasury decided to pull that lever any time soon. But suggesting therefore that you should never raise taxes once we are out of the immediate crisis shows either a lack of awareness of the seriousness of the hole we are in or excessive faith that the money will magically come through other routes. (In fairness to the CPS, they were arguing that the Chancellor should not raise Corporation Tax or Capital Gains tax; I have some sympathy with that suggestion – I would target income tax and VAT, regardless of the last Conservative manifesto.)
You cannot raise sufficient funds to deal with the situation we are in through further austerity. And I’m afraid that when things do calm down the exchequer’s tax take is not suddenly going to rocket well past the level it was at before March this year. Taxes will therefore have to go up, and to suggest that they should not do so – or, worse, that they should be cut – shows the same grasp on economics as Jeremy Corbyn and his acolytes. As Sunak said later in his conference speech ‘if … we argue there is no limit on what we can spend, that we can simply borrow our way out of any hole, what is the point in us?’