Britain can no longer expect others to pay its bills

The Chancellor’s package recognised that sound money is the basis on which prosperity is earned

There will be precious little rejoicing over the Chancellor’s Autumn Statement. But no-one could ever have expected that there would be. We live in tough times and the Government has tough choices to make.

The brutal truth is that, as a result of the pandemic, Russia’s invasion of Ukraine and the resulting increases in the cost of energy and food, we are a poorer country than we used to be. That being so, we cannot expect to be able to sustain our previous standard of living at the expense of others. As the reaction of the markets to September’s mini-budget demonstrated, the others are not prepared to pay our bills.

So the question which has to be answered against this depressing background is whether the Chancellor has broadly made the right choices to put the country on track for better times in future.

As the Prime Minister has said, the first priority has to be the achievement of sound money – that unfashionable but fundamental principle – eventually by balancing the books, but first and foremost by taming inflation.

We are far from alone in suffering from this scourge. Germany, a country whose collective memory is steeped in a terror of inflation which so devastated it in the last century, is currently suffering price increases of over 10 per cent, something absolutely unthinkable just a very short time ago.

Of course, the primary responsibility for dealing with inflation lies with the Bank of England, which is why interest rates have gone up. But it is crucially important that the Government’s fiscal policy pulls in the same direction.

We cannot make progress on this front if the Government has its foot on the accelerator while the Bank has its foot on the brake. As the Office for Budget Responsibility confirms, the Chancellor’s statement meets this test. And the relative calm in the markets is a clear indicator that economic stability has been restored.

Conservatives believe in low taxes, so we don’t like to see them go up. But our commitment has always been to keep taxes as low as possible consistent with the achievement of other vital policy objectives, including maintaining effective public services and looking after the most vulnerable in our society. This is where striking the right balance becomes so difficult. But it seems to me that the need to spend more on the NHS and education is compelling.

The latter, in particular, is the key to a prosperous future. The need for a well-educated workforce has never been more pressing. I hope that at least some of the extra resources will go into providing the life-time learning which is essential if the skills of our workforce are to be kept up to date.

And increasing benefits in line with inflation, together with the other measures intended to help those who are most in need, should ensure that the most vulnerable get through what is bound to be a difficult year with as little difficulty as possible. As to the tax rises, they reflect the principle that the better-off should shoulder the greater burden.

In particular, and here I know I am treading on controversial ground, I welcome the increased windfall tax on energy companies. None of these companies prepared their business plans on the basis that there would be a war in Ukraine which would result in the steepest increase in energy prices we have seen for a generation.

They have made large unexpected profits as a result – profits which can genuinely be described as windfalls. So it seems to me entirely appropriate to tax them on those windfalls just as Margaret Thatcher taxed the banks on windfalls in similar circumstances.

Of course, we all want the economy to grow. And the commitment to provide over £600billion in capital investment and, in particular, the promise to use our Brexit freedoms to reduce burdensome regulations demonstrate the determination to create the conditions for economic growth.

But growth must be based on sound foundations and this is what the package as a whole provides.

Where does all this leave us in terms of the next general election? I firmly believe that if, as a result of these measures, we can see in a year or so inflation and perhaps interest rates coming down, we can go to the country in two years’ time showing that the tough measures taken are bearing fruit.

Would people then want to risk Labour ruining the progress we could point to? If we hold our nerve, I believe there is everything to play for. Yesterday’s statement can be seen as the starting point.

We cannot make progress if the Government’s foot is on the accelerator while the Bank’s foot is on the brake