The Tories must not destroy the things they love
An excessive focus on austerity is damaging society. The Budget is a chance to put matters right
As Brexit consumes Westminster, a Budget looms. And not just any old Budget: what Philip Hammond says on Monday should begin Britain’s journey out of austerity.
It is not an easy Budget, and the Chancellor has to contend with obvious “known unknowns”. There is uncertainty surrounding Brexit: uncertainty, Eurosceptics would say, that Mr Hammond has brought about. There is also the risk that Tory rebels, angry about Brexit, might refuse to support proposed tax changes. Having watched his first Budget unravel over a National Insurance hike, the Chancellor will surely duck controversial tax increases this time.
The Budget should be a platform to warn Brussels what Britain would do in the event of a no-deal Brexit. The Chancellor was, after all, the man who once threatened to “change our economic model” if the EU refused a sensible deal. His timidity in dealing with Brussels, however, suggests he will shy away from spelling out what he meant two years ago.
The big fiscal job is to confirm that a spending review, which allocates budgets to government departments, will take place next year. That means, next spring, he will announce the total public spending “envelope” for the years after 2020. He will therefore need to explain on Monday how he will deliver the Prime Minister’s vow that, if a Brexit deal is agreed and ratified, austerity will come to an end.
Theresa May’s promise should not have been a surprise to Mr Hammond. Inside government, he often talks of a “deal dividend”. And in March, he predicted he would have “capacity,” by autumn, “to enable further increases in public spending and investment in the years ahead”.
What this will mean in reality is the call the Government must make. After years of austerity, Britain finally has a current budget surplus. But this achievement has come at a price. The public, and the public servants who deliver our services, are tired of the sacrifices demanded by austerity.
The NHS has been shielded but, with an ageing population, cuts to social care budgets and rising health costs, in real terms its budget has been cut. School budgets have not kept pace with pupil numbers. The police and prisons are struggling to cope with rising crime.
Defence spending has fallen as a share of national income every year since the Eighties, but the Armed Forces have to contend with growing and dangerous threats. Local authorities have suffered the worst of the spending cuts: the visible increase in rough sleeping in English cities is just one result. And as the Chancellor knows, Tory MPS are in meltdown over the roll-out of Universal Credit. At least some of the trouble with Universal Credit started with the welfare budget cuts imposed by George Osborne.
Some Conservatives will insist that, having achieved a current budget surplus, the Treasury ought to aim for a total surplus, even though the only sums now borrowed fund investments with a guaranteed economic and fiscal return, such as transport infrastructure. Their approach makes little economic sense and would do unnecessary social damage. It would also lead people to believe, once more, that the Tories know the price of everything and the value of nothing.
There is obviously far more to conservatism than the caricature of the Tories as the “penny-pinching, balanced-budgets” party. And there is more to it than the related Tory reputation as a “shrink the state and cut taxes” party.
Of course the Tories support fiscal responsibility and oppose living for today at the expense of tomorrow. But conservatives also cherish a strong society: a society that, through shared institutions and culture, encourages us to trust one another, helps us to support one another and allows communities to stand on their own two feet.
Conservatives instinctively understand that an over-mighty state endangers a strong society and undermines personal liberty. But they often fail to acknowledge that in fact a weak state can do the same damage.
Many communities, especially in the Midlands and the North of England, struggle with the historical failures of Right and Left: rapid de-industrialisation, wasteful interventions by councils and governments, and a brain drain caused by a lack of local opportunity. These communities need private-sector investment, but to get it they need public investment, too: in education, housing, community organisations, infrastructure and programmes to retrain working-age people.
If the Chancellor is rigid about balancing the overall budget, or keeping spending too low, he risks destroying the local institutions and social capital that conservatives revere, that are vital to community life.
Like the Labour Party, which through an obsession with diversity and identity politics, is killing working-class solidarity, without change the Tories risk destroying the thing they love most: the strong society that makes personal liberty and vibrant communities possible. But this tragic outcome is not inevitable, and Monday’s Budget can help to avoid it, by beginning the country’s journey out of austerity.