The Conservative party’s contest to replace Boris Johnson as prime minister has an air of fantasy. Listening to the candidates, you would not know that spiralling energy costs are causing misery to households, and inflation is now broadening to most goods and services. Or that simmering disputes over pay and conditions promise a prolonged period of industrial unrest. You certainly would hear little about the UK’s longer term challenge of sluggish growth, made worse by poor planning regulations and the exit from the EU.
Instead, the candidates are competing largely on a single issue of if and when they will cut taxes. One reason the internal debate refuses to recognise the reality of Britain is the early success of Rishi Sunak. The former chancellor, in post during the pandemic, quickly gathered a lot of endorsements from Conservative MPs. Promises of immediate tax cuts are a way for Sunak’s opponents to remind Tory members that he has been a tax-raising chancellor. Although his record is far from perfect he has at least been a rare voice of realism as far as fiscal policy is concerned.
Whoever emerges as the next prime minister will have serious political and economic constraints. UK voters’ strong endorsement of Johnson in 2019 came, in part, due to the Conservatives’ promises of more money for the country’s schools, hospitals and the police. Those commitments cannot easily be put aside or forgotten, and Conservative politicians must recognise that, ultimately, an appetite to spend must be balanced with a willingness to tax.
Sunak and Kemi Badenoch, who is running as the standard-bearer of the socially and economically conservative right, have been willing to explicitly argue that cuts in tax must first be preceded by reductions in public spending. But the realism does not extend far: Neither has shown any real willingness to make an explicit argument for what that means in practice, beyond Sunak’s promises not to engage in ‘fairy tales’, and Badenoch’s to ‘tell the truth’.
There are circumstances in which cutting taxes is the right remedy, but the structure of how governments levy taxes, and the incentives they create in doing so, are more important right now than the overall level of taxation. These aims, the focus of a lecture given by Sunak earlier this year, should be near the centre of the contest.
The incredible pledges being put out by the Conservative party’s leadership candidates are, like the UK’s inflation problem, one caused by demand as well as supply. The candidates have made irreconcilable and unachievable promises because they believe it is what their members and MPs want to hear.
The Conservative party, and the UK as a whole, badly needs an injection of realism into the debate; it is telling that some of the broadcasters’ questioning has proved uncomfortable for candidates. Televised debates this weekend are an opportunity to press the candidates on the substance and trade-offs of their plans.
But Tory MPs, too, need to take responsibility for the tone and direction of their contest. That Tom Tugendhat, an articulate and well-respected select committee chair, has no prospect of winning due to his vocal advocacy for a Remain vote six years ago feels like behaviour more suited to a historical re-enactment society than a governing party.
Too many Tory MPs have spent the contest making demands for further spending in the morning while calling for tax cuts in the afternoon. The party faces not only a choice of leader, but a more fundamental choice for Conservatives about whether or not they wish to conduct their government in a serious manner.
Source: Economy - ft.com
