Time is running out for our party to show we deserve to stay in government
This week’s economic fallout from the Chancellor’s statement on 23 September has been painful to watch.
Amidst deteriorating international confidence in the United Kingdom’s financial outlook and a dramatic fall in the value of government-issued debt bonds, the Bank of England was forced to step in on Wednesday and purchase £65bn in government debt. That it did so out of fear of widespread insolvency in the pension funds market, which could have precipitated a 2007 Northern Rock-style collapse, is a reflection of how serious the situation had become.
Nothing about the Chancellor’s opening weeks at the Treasury have reassured me
As a Conservative, I sympathise with any agenda which aims to cut taxes, thereby allowing people to keep more of their hard-earned money. In cutting National Insurance contributions and the basic rate of income tax the Chancellor’s intentions were noble, and his sincerity in believing this the best way to help working people beyond doubt. Meanwhile, the Bank’s intervention has, for the time being at least, had the desired effect, and the slide in the values of sterling and gilts have reversed.
However, as a Conservative I am also acutely conscious of budgetary constraints, and the need for sound money. Nothing about the Chancellor’s opening weeks at the Treasury have reassured me – nor, more importantly, the markets – in this regard. From the ill-advised dismissal of Tom Scholar to the dash to rush through fiscal policy measures without an accompanying OBR report or proper parliamentary scrutiny, actions have almost seemed designed to provoke the markets at a time when they were already demonstrably volatile.
We also need to be clear about what market investors were signalling this week in choosing to dump sterling on the back of the Chancellor’s tax cuts, as well as following the Bank’s decision last week to raise interest rates by 0.5 per cent, which surely represented an undershoot. Tax cuts alone are highly unlikely to prove sufficient in achieving a sustained 2.5 per cent growth target, nor are vague pledges to remove red tape, which every government in living memory has promised to cut. The biggest priority at the present time must be to address the UK’s chronically low productivity rates, for which a resolute focus on boosting people’s skills across the country is a prerequisite. This can drive sustained income growth which reflects improved employment performance, rather than tax cuts which will not do so if accompanied by spiralling mortgage repayments.
Whilst the government must be applauded for introducing the Energy Price Guarantee, which though not as well targeted as it should have been will give people certainty regarding their energy bills, I continue to believe that it could be doing more for the most vulnerable, for whom the tax cuts do little. Traditional social security support mechanisms are there for a reason, and it is essential that Universal Credit serves as a safety net for people at risk of destitution amidst the spiralling cost of living. I argued and voted against the withdrawal of the pandemic-induced £20 uplift to this last September and believe that the previous government made a strategic mistake in proceeding with this. This year’s up-rating must reflect a real-terms rise. Anything less will be unconscionable to people given the government’s tax-cutting agenda elsewhere.
Looking ahead, the government must do everything it can to reassure the markets of the UK’s ability to finance its debt, and through this restore its reputation for economic competence. This surely means bringing forward November’s medium-term fiscal plan, which will crucially set out details on fiscal rules. It must also come forward with a plan for growth – which it is now betting the house on – that recognises that the role for any government in the modern world goes beyond simply “getting out of the way”, even if this role is simply to run a balanced budget.
With a general election drawing nearer, time is running out to show the British people that the Conservative Party deserves to retain the honour of serving as their government.
Peter Aldous is the Conservative MP for Waveney.
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