Tory MPs Are Dreading The Next Election, Even If Jeremy Hunt Has Calmed Markets
Prime Minister Rishi Sunak and Jeremy Hunt at Cabinet this week (Alamy)
Jeremy Hunt's long-awaited Autumn Statement managed to avert market panic and so far, a Tory rebellion, but Conservative MPs are still worried for their chances at the next General Election. In fact, they fear Hunt's gloomy grappling with the country's finances may have made their prospects even worse.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have stressed that there are no easy decisions for the government as they attempt to fill a gaping financial black hole made larger by the calamitous "mini-Budget" unleashed in September by their predecessors Liz Truss and Kwasi Kwarteng.
Nevertheless, when he addressed the Commons on Thursday morning, Hunt insisted that his plan to repair public finances through tax rises and spending cuts totalling £55bn would be guided by "compassion" and vowed to protect the most vulnerable.
He confirmed that benefits and pensions would rise in line with inflation while most departmental spending cuts have been deferred until after the next General Election, which must be called by December 2024.
But with the Office for Budget Responsibility (OBR) painting a bleak picture of what awaits the country over the next few years in its independent forecast published to accompany the government's economic agenda, some Tories now believe that the uphill battle they already faced to stay in government at the next election is now even steeper.
“Politically speaking, it’s really hard to see where we go from here. Do we honestly think we are going to be in a position to fight a General Election?” a former secretary of state told PoliticsHome.
The senior Conservative MP said that while Hunt was "as good as he could be to his word" when it comes to protecting the most vulnerable from the rising cost of living, "the real message from the statement is there’s a whole tonne of pain coming for everyone, and it’s not clear where the new growth comes from".
“It’s pretty grim reading," they added.
Households already enduring soaring energy bills and widespread inflation face a seven per cent fall in living standards in the space of just two years – the biggest fall on record. Meanwhile the UK, which is already in recession, is set to see the tax burden reach its highest level since the end of World War Two.
The Conservatives remain far behind Labour in the opinion polls, with Keir Starmer's party consistently enjoying leads of over 20%.
PoliticsHome understands that shortly before Hunt delivered the Autumn Statement to MPs on Thursday morning, Conservative MPs in vulnerable seats – Tories "on the frontline", as one source described the group – were invited to CCHQ for a gloomy briefing about the latest opinion polling.
“I don’t know what was more bleak: the polling data or the Autumn Statement," said an attendee.
Olly Bartrum, senior economist at the Institute for Government, told this week's episode of PoliticsHome's podcast The Rundown that Sunak and Hunt's fiscal plans had succeeded in bringing about stability in the markets after the chaos unleashed by the Truss and Kwarteng mini budget in September.
But he acknowledged there was a pretty "low bar", after Truss and Kwarteng managed to spark economic turmoil that led to historic intervention from the Bank of England with their own plans not even two months ago.
Bartrum set out in stark terms the scale of the crisis that the Sunak government is tasked with guiding the country through, as well as the economic backdrop against which the next general election is set to be fought.
"It will be the largest – and importantly, the steepest – fall in living standards that we have had since the Second World War," he said.
"That's going to dominate politics for the next few years and frankly, have some pretty dire human consequences."
Several financial experts told PoliticsHome that the decision by Sunak and Hunt to raise the cap on average household energy bills next spring meant that the situation facing many people would get even tougher.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said the new package from April will keep bills from rising to as much as £3,700, but believed the Tories still had a long way to go to get voters back on side.
"In March this year we were paying an average of £1,277 on our energy bills, so we'll have to find almost two and a half times more cash to pay our bills within 13 months," she explained.
"The fact that this comes on top of so many other price rises means life is going to get even tougher next spring."
Adam Scorer, chief executive at National Energy Action, agreed that even with some remaining government support on energy, people would be left struggling.
"An average bill of £3,000 from spring is an increase of 40% from current record levels, given that the government has ceased the support currently provided by the energy bill support scheme, yet energy bills are up by a staggering 130 per cent," he said.
"Sadly, this means there is now no end in sight to the energy crisis for struggling households. For most, it looks as if it will get even harder."
But so far, there's no sense that MPs are set to turn on Sunak as a result, as they did when times got tough for his short lived predecessor Truss, and Boris Johnson just months before that.
Two former Cabinet ministers who spoke to PoliticsHome predicted that Conservative MPs would stay united behind Sunak because the alternative is a return to Tory party chaos.
“In the end, the party is going to swallow this on the basis that we have got to come together behind a plan," said one.
"I suspect we are going to hold together because we have no choice," said the other.
One senior Tory MP expressed relief that Hunt and Sunak didn't do as they had feared and "overcorrect" the mistakes of Truss and Kwarteng by going too far with his cost-cutting measures.
"A lot of us were worried that in trying to look strong to the OBR, he’d go too far and impose austerity 2.0. He’s managed to avoid that. The big signals were on schools and health," they said, referencing outlier budget boosts for the two departments.
The government has sought to stress that the proposed spending cuts are significantly smaller in percentage terms than those implemented by former chancellor George Osborne in the last decade as part of the austerity programme of the Conservative government led by David Cameron.
The IfG's Bartrum said that while this is true, the context now is "extremely different" to when Cameron became prime minister in 2010 because now there is "much, much less room for cuts".
"Osborne made the cuts to what were relatively strong public services and at a time when there may have been efficiencies to be found," he told PoliticsHome.
"It's much more difficult to deliver those sorts of cuts due to the strain public services are under, and also because of the pressure on public sector wages."
Additional reporting by Alain Tolhurst.
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