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Westlake Legal Group > Public Spending

‘We probably didn’t cut enough’ may be the most important revelation from Cameron’s book

Understandably, most of the headlines about David Cameron’s new book have been dominated by other angles – be it his views on the EU referendum, on Boris Johnson and Michael Gove, or, thanks to the Guardian, the question of whether ‘privilege’ dulls the pain of loss – but it strikes me that when the current news agenda has subsided, some of the most lasting elements of the book are likely to be his reflections on public spending and austerity.

Here’s the crucial passage (with my emphasis):

‘Looking back over our first few months at the helm of Britain’s economy in 2010, what do I think? Did we cut too much?

My assessment now is that we probably didn’t cut enough. We could have done more, even more quickly, as smaller countries like Ireland had done successfully, to get Britain back in the black and then get the economy moving.

Those who were opposed to austerity were going to be opposed — and pretty hysterically — to whatever we did. Given all the hype and hostility, and yes, sometimes hatred, we might as well have ripped the plaster off with more cuts early on. We were taking the flak for them anyway. We should have taken advantage of the window of public support for cuts when it was open.’

It’s 2019, so the immediate reaction from various people has been to fire up the Outrage Bus about the very idea, which incidentally rather demonstrates his point about hysterical opposition regardless of the facts of an argument.

But ignore the ranters and consider the implications of Cameron’s conclusion. This was a live and controversial debate throughout his time as Leader of the Opposition, and well into the Coalition years. As Campaign Director of the TaxPayers’ Alliance between 2007 and 2010 I saw some of it first-hand.

Remember that despite the retrospective demonisation he has since been subjected to, Cameron was never desperate to reduce public spending. He didn’t see it as inherently wise or responsible to balance the books – or, at least, not sufficiently so to make it a priority.

In his 2019 account of events he writes that:

‘It doesn’t require a degree in economics to appreciate that if you keep spending faster than the economy grows, and faster than tax revenue grows, eventually you will be in trouble. Which Britain had been doing…’

but back in the first few years of his leadership he did not seem to appreciate this truth.

In 2007, George Osborne committed the Conservatives to matching Labour’s spending plans, whatever they might be, in Government. That could never have happened without Cameron’s consent, and the thinking was quite clear: they saw fiscal discipline as a reputational risk, and were keen to square it away by reusing the tactic Blair used a decade earlier to square away concerns about Labour’s fiscal irresponsibility. To reiterated: they felt that pledging to mimic Gordon Brown’s approach to fiscal policy was safer electorally than espousing the more traditional conservative view that Cameron now says was obvious.

If you doubt that, consider that it took until the second half of November 2008 before the Conservative leadership was finally willing to abandon that pledge. Then, Cameron argued that

‘The world has moved on. People are not fools… after 11 years of waste and broken promises from Labour, [voters] can see that spending more and more alone does not guarantee that things get better.’

What had ‘moved on’ most fundamentally was the start of the financial crisis, of course. By the time Cameron and Osborne changed policy, banks had started collapsing, the economy had been shrinking for months, and the crisis was well underway. Just as they had ignored the urgings of fiscal conservatives before pledging to match Labour’s spending plans, so they had resisted the growing pressure to abandon the pledge. They did so in the end, but it took months before the inherent truth of a conservative position became obvious to the point of being irresistible.

After that battle came a new disagreement about the scale and pace of fiscal restraint if and when the Conservatives got into power. Given the context above, it isn’t hard to imagine that there was still heavy reluctance to be radical in the scale or the pace of spending reductions. And yet there was a strong case to do so – in September 2009 the Institute of Directors and the TaxPayers’ Alliance produced a report proposing savings of £50 billion and explicitly arguing that the UK ought to follow the example of Canada in achieving a ‘rapid and durable fiscal consolidation’.

The political argument was precisely that which Cameron now espouses: that it is harder to go slow than to go quickly on such measures. Just as the original spending policy appeared to assume that voters and conditions would not change between 1997 and 2010, Cameron’s recognition in 2008 that ‘the world has moved on’ seemed to neglect the possibility that people might start to change their minds yet again once an austerity programme had been underway for some years.

He is correct now that there was a ‘window of public support for cuts’ that was not inevitably going to stay open forever. But there were voices telling him this at the time; they just weren’t listened to. It reflects well on him that he is willing and able to recognise – on this topic, at least – that error. (It’s notable, by the way, that George Osborne does not seem to have done so.)

The change in the former Prime Minister’s opinion has consequences today, beyond some people now having the right to say ‘I told you so’.

For a start, it’s a simple reminder that fundamental fiscal conservative principles exist for a reason, and are wise to follow. Imagine the political impact had Cameron already been arguing before the financial crisis that Brown was living beyond his means, rather than promising to do the same.

More specifically, it’s a lesson in the practical politics of doing what voters often call on the Conservatives to do: take the tough decisions after Labour mess things up. Such permission is powerful, but it can also be temporary. Fail to recognise that there is a ticking clock, and you risk failing to deliver on the mission you have been given.

Finally, it throws into relief the fact that there currently isn’t much discussion of fiscal policy in any direction on the centre right. What is the current fiscal policy, and what are the alternatives? Stian Westlake and Sam Bowman’s recent pamphlet on ‘Reviving Economic Thinking on the Right‘ is a rare example of people engaging in the necessary thought and debate which is required to answer those questions, but more should follow their lead and get stuck in. That’s the best way to avoid repeating the errors of a decade ago.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Gareth Streeter: An intelligent spending review could halt the Liberal Democrats in their tracks in the South West

Gareth Streeter is a Councillor in Croydon and a former Parliamentary Candidate.  He grew up in the West Country, where he has campaigned extensively for 20 years.

As another spending review – fuelled by talk of a Brexit dividend and a renewed commitment to public spending – draws near, the usual pleas for pet projects and priorities are again entering the public arena.

A number of exciting pledges around education, the NHS, and policing have already been announced over the summer, and it’s clear that the direction of travel is centring around a renewal of One-Nation conservatism and a commitment to providing opportunities for Britain’s most vulnerable inhabitants.

Almost inevitably, resulting conversation starts to drift toward the Conservative Party’s offer to the North of England. This is both welcoming and encouraging – from the Northern Powerhouse to a revolution in school standards, a genuine commitment to broadening our UK-wide appeal has been one of the most inspiring strands of Conservative Government since our return to power in 2010.

However, as we approach the spending review and the surrounding political narrative it will shape, it is vital that another often-neglected part of England receives its fair share of attention and investment. Namely, the South West.

Often lumped together in discussions on the ‘South’, the South West does not share the wealth, infrastructure, or connectivity of its Eastern counterpart.  While many picture the region as the backdrop to their idyllic childhood holidays (which it still supplies a-plenty) those of us who live there or grew up there know that this it is not the full story.

Rural and coastal poverty is every bit as biting as urban poverty, and research suggests that 600,000 working age people across the region find themselves subject to it.

But there is also an acute political motive for ensuring our Western-most region receives its share of attention. We’ve all enjoyed recent polls which suggest that the much needed ‘Boris bounce’ is steering us toward a Conservative majority at the next election – but thanks to an unwelcome rise in support for the Liberal Democrats, there is a real danger that this could come at the expense of some of our MPs across Dorset, Devon, and Cornwall.

What Liberal Democrat campaigns lack in integrity, they often make up for in precision and effectiveness. Buoyed by their recovery in the polls and success in recent local elections, Lib Dem strategists will be setting a strong collection of South West seats in their sites.

However, with the forthcoming spending review, we have a real opportunity to show and strengthen our commitment to the Westcountry, and halt the Liberal revival before it has truly begun.  Here are just 5 suggestions that the Government should consider:

Introduce a rural bus route guarantee – Even without pressures on local authority budgets, rural bus services were always likely to decline in usage.  However, for those that do rely on them they are an absolute lifeline. While the DfT has already provided important funding to keep services running, there is now scope for a modest increase which can be packaged as a pledge to ensure every community is served by a bus at least twice a day.

Continue to invest in high-speed broadband – While the words ‘gig-economy’ are not always music to the ears of policy makers, the South West has an opportunity to play host to the sector’s bright side. I regularly come across self-employed marketers, website designers, journalists, and PR consultants who would love to make their home in the South West, but would struggle with a patchy and slow broadband service. Recent surveys have shown that the South-West has the worst broadband service in England but that people in Dorset, Devon, and Somerset would value an improvement the most. Government investment in high-speed broadband is already revolutionising the local economy – but the spending review present a great opportunity to hammer home our commitment.

Turbo-charge tourism – While some claim that Brexit has already damaged Britain’s tourism sector, there is little evidence to support this. The opportunity, however, is huge. In Government, the Conservatives have already done much to revive coastal communities with targeted funding – but now it’s time to announce a new headline figure for the Coastal Communities Fund. Not only will this make a tangible difference to the communities that need the boost – it will send a clear message to tourists everywhere that Brexit Britain is open for business.

Ensure a West Country voice in fisheries policy – The Common Fisheries Policy has been one of the most controversial aspects of EU membership for decades, and almost everyone accepts that returning control of policy making to the UK is essential once we Brexit. However, in the run up to our departure, most of the debate has focused around protecting the needs of Scottish fishers – a community which has an entire devolved administration to fight their corner. The needs of South-West fishing communities also need to have a voice in the setting of future policy, and Defra should formalise the process of securing one.  There would be real merit in the Government appointing a representative – perhaps a West Country MP – to advocate the needs of South West fishers in the setting of future policy.

Create a long-term road map for agriculture – The Government has played a blinder by guaranteeing agricultural subsidies until 2022.  However, as we constantly hear, business needs certainty in order to plan effectively and in this respect, farmers are businesspeople like any others.  If the event of a no-deal Brexit, a road map on the future of agriculture beyond the next three years must be top of the agenda.

The South West of England, like every other part of the UK, does better with the Conservatives.  But in the same way that the Liberal Democrats have chosen to champion project fear in their national narrative, we should expect an onslaught of highly localised scaremongering campaigns to be unleashed in the West Country as an election draws near.

By highlighting our excellent record, ensuring a fair slice of the pie in the spending review, and intentionally crafting a narrative for the South West of England, we can ensure that a future Conservative majority Government does not have to come at the expense of hard-working and effective MPs in Cornwall, Devon, and Dorset.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How long will the snap ‘one-year’ Spending Round really last?

The speech on fiscal priorities which the Chancellor was due to deliver today was cancelled at 2.36pm yesterday. In its place, a ‘fast-tracked Spending Round’ on 4th September was announced by press release at the, ahem, unusual time of 10.42pm.

The round takes the place of the planned full Spending Review – on the basis that, as Sajid Javid’s Telegraph article (published at almost exactly the same time) explains, ‘it would be a distraction to start debating every line of government funding’ at this crucial Brexit juncture.

That can be true in a number of possible ways: it could be distracting to the Treasury in the midst of complex negotiations, and labour-intensive preparations for deal or No Deal scenarios; it could be distracting for ministers to force them to fight one another for money just when Downing Street needs them to be completely disciplined and obedient; or it could be distracting for voters when the Prime Minister wants and needs to communicate a very clear message to them, not least for the election which is inevitably on its way. Or all of the above.

In a way, this is a compromise – or at least a hiatus – in a fiscal dispute. One reason a lot of ministers in the fag-end days of Theresa May’s administration were concerned and annoyed about her attempts to make financial commitments in the search for a legacy was that they felt it was pre-empting the necessary and imminent full Spending Review planned for the Autumn.

Postponing that review restricts the new Government’s freedom of action by effectively continuing Philip Hammond’s top-line rules for fiscal policy, but, as ever, such ‘rules’ are often in practice mere guidelines. Hammond’s successor writes himself new space: ‘Thanks to the hard work of the British people over the last decade, we can afford to spend more on the people’s priorities – without breaking the rules around what the government should spend.’

That might sound a little uncomfortable, but ministers will likely be able to live with it for the good reason that it won’t last very long. Officially this Spending Round ‘will give Whitehall departments certainty over their budgets for next year’, but will it really last that long?

Consider the possible scenarios. Either the Conservatives deliver Brexit, then win an election. In which case they’d have a new mandate, potentially a real majority, and Javid would have a good basis to introduce a proper, wide-ranging Spending Review and full new Budget, setting a new agenda for himself and Boris Johnson, finally free of May and Hammond’s hangover. Neither man is likely to want to wait until next year’s official Budget date – some time in mid-to-late Autumn 2020 to do things their own way/

Or the Government collapses, and is replaced by the mish-mash of separatist/unionist/socialist/liberal/conservatives we saw yesterday parading their fragile agreement on not liking Brexit. They’d want to try to do things differently, whether they were able to reach agreement or not.

Or the Conservatives lose an election, in which case some variant of Labour, in majority or in a coalition of some sort with the Lib Dems and/or the SNP, come in – and they’d certainly want to crack on sharpish with fulfilling whatever exciting form of job-destruction and asset-seizure that John McDonnell was dreaming of for all those backbench years. Again, bye-bye one-year Spending Round.

So in practice, this change may be frustrating or restrictive to some degree, but it isn’t likely to be something ministers have to suffer for very long. For good or ill.

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So we’ve had NHS, policing and immigration plans from Johnson. Stand ready for a schools spending pledge.

So Boris Johnson has pledged 10,000 new police officers, as well as a raft of tougher-sounding anti-crime policies, an Australian-style points-based immigration system (not to mention the relaxion of migration rules for scientists), and £1.8 billion for the NHS.  It isn’t hard to see where he will go next, and soon.

The remaining element of Dominic Cummings’s favourite set of policies – tax cuts for lower-paid workers – may have to wait for a publicity push, because these would need legislation, and the Government has no working majority.  Though the Prime Minister could try them on the Commons anyway, daring Labour to vote them down, as part of an Emergency Budget in October (if there is one).

What is likely to come sooner is a Government commitment to spend at least £5,000 on every secondary school pupil.  ConservativeHome understands that this announcement is written into this summer’s campaigning grid.  But we need no special briefing to work this out for ourselves in any event – and nor does anyone else.  For why peer into the crystal of Downing Street announcements when one can read the book: i.e: Johnson’s Daily Telegraph columns?

For it was in one of these, back during the Conservative leadership election, that he pledged “significantly to improve the level of per pupil funding so that thousands of schools get much more per pupil – and to protect that funding in real terms”.  The £5000 figure was briefed out separarely.  This promise was one of the two main big ticket spending items of his campaign, the other being that undertaking to raise police spending.

“It is simply not sustainable that funding per pupil should be £6800 in parts of London and £4200 in some other parts of the country,” the former Mayor of the capital wrote.  Just as the NHS spending announcement was framed by a visit to hospitals in Lincolnshire and Nottinghamshire, expect any school spending news to be projected by a trip to schools in Leave-voting provincial England: all part of the push to squeeze the Brexit Party.

If that column is any guide, don’t be surprised to see a maths, science and IT element too – which would also be very Cummings – as well as a stress on “giving real parity of esteem to vocational training and apprenticeships”.  There is evidence that these are popular all-round, but especially among older voters.  Gavin Williamson is bound to have a supporting role, just as Priti Patel has had with the weekend’s law and order initiatives, but Johnson will lead.

Like his other spending promises, Johnson’s school pledge may not be deliverable in the event of a No Deal Brexit, and there are inevitably questions anyway about timescale anyway.  But if you want to know what more will be in his campaigning package, look no further.

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“To literally feel terror”

Boris Johnson wants, specifically, to frighten Labour off a no confidence vote and, more broadly, to intimidate the anti-No Deal Brexit Commons coalition before the Commons returns in September.  That means demonstrating that voters are backing him.  That requires improving opinion poll ratings.  And that, in turn, means an August blizzard – yes, such a thing is possible – of policy announcements to prove that his new government “is on your side”.

So to Dominic Cummings’s trinity of an Australian-style points-based immigration system, more NHS spending and tax cuts for lower paid workers we must now add action on law and order.  The new Prime Minister promised 20,000 more police during his Conservative leadership election campaign.  To that we must now add 10,000 new prison places and greater use of stop and search powers – both of which are announced today.

Or rather we would do, if Johnson had a durable majority, and were the future more clear.  The money to fund those new prison places may not be available in the event of No Deal: it may be needed for other measures.  And sweeping changes to sentencing would require leglislation, which the Government is in position to present to Parliament.

None the less, the Downing Street bully pulpit has its uses, and if the Prime Minister want wider stop and search powers to be available, he is in a position to get his way – for as long as he’s in place, anyway.  Today’s push should help.  As Matt Singh writes, there has already been “a substantial Boris bounce”.  It has largely come off the back of Brexit Party supporters, and this latest initiative is aimed at them (as well as Labour working class voters).

So too was the appointment of Priti Patel as Home Secretary.  ConservativeHome is told that there was a collective intake of breath in Downing Street when she said recently that she wants criminals “to literally feel terror”.  Number Ten need not have worried about how that view would go down.  There is “overwhelming support” for it among the public, according to YouGov.

If Johnson somehow survives the autumn without a general election, or wins one with a majority, a further question will arises about all these spending plans – namely, whether or not they’re consistent with the traditional centre-right commitment to fiscal stability.  The Prime Minister could be forgiven for thinking, given the probability of an autumn poll and the uncertainty of any result, that this would be a nice problem to have.

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WATCH: Cleverly – Extra NHS funding comes from economic growth

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John Penrose: The conventional wisdom about this leadership election is wrong. Hunt’s spending plans are neither unaffordable nor irresponsible.

John Penrose is MP for Weston-super-Mare and a Northern Ireland Office Minister.

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.

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