Credit where credit is due. The UK economy will now avoid a technical recession. Avoiding a technical recession is hardly something to cheer about, and the economy is still forecast to contract by 0.2% in 2023, but considering forecasters were predicting the UK would experience its longest recession in modern history, under Sunak and Chancellor Hunt’s stewardship the UK economy is looking more resilient. In contrast to his Autumn Statement 2022 where Chancellor Hunt sought to fill a black hole in the country’s finances, in his Spring Statement on Wednesday the 15th March, Hunt was able to speak of fiscal headroom.
With 5.2m people currently out of work, it was no surprise that a key theme of the Spring Statement was how to increase the size of the Country’s workforce. Tax relief was extended on pensions and the Lifetime Allowance charge was abolished altogether (the cap on the amount workers can accumulate in pensions savings before having to pay extra tax). It is hoped that these measures will encourage older workers to remain part of the workforce for longer. The current standard lifetime allowance is £1,073,100 which means a very small % of the workforce will benefit from these changes. Extending tax relief to give wealthy individuals during a cost of living crisis doesn't sit well with me. Surely there is a better way of increasing the workforce than exacerbating generational inequality by giving a bung to those already with more than enough?
Another measure which has gained a lot of attention is 30 hours of free care for children aged 9 months to 3 years to help parents return to work sooner. This is a package worth on average £6,500 every year for a family with a two-year-old child using 35 hours of childcare every week. Child care costs are notorious in this country and millions of families will be able to benefit from this measure when it fully comes into effect in 2025. There is no denying, though, that with this policy the welfare state has just grown new arms and legs. As Paul Johnson of the Institute of Fiscal Studies puts it, ‘support for childcare has moved from being targeted on the poor, aimed at child development, to providing a subsidy for working parents.’ The country’s addiction to state intervention following Covid-19 sees no sign of abating.
Perhaps the moment which got the biggest reaction in the Commons was when Hunt announced that the Office of Budget Responsibility is forecasting inflation to fall to 2.9% this year, having peaked at 11.1% in October 2022. With inflation eroding living standards for much of 2022, this should be welcomed from all quarters. It also vindicates the Government’s approach to public sector pay rises. Many unions have been calling for pay rises in line with inflation, with the Royal College of Nurses demanding 5% above inflation, a request the Government dismissed out of hand as unaffordable and risking ‘baking in’ inflation. It is now being reported that the Government has agreed a pay deal with the NHS (excluding doctors) which will see a pay increase of 5% - the unions have blinked.
Away from the economy, a majority of MPs voted in favour of giving the Illegal Migration Bill its second reading by 312 votes to 251. Notably, despite some disquiet from some Tory backbench MPs including former Prime Minister Theresa May, there were no rebellions from Conservative MPs. This suggests that the Government’s whipping operation is working effectively and that Sunak has a growing authority in the party.
Having failed to win the support of two thirds of the parliamentary party in the first Conservative leadership election last summer, whilst also having never been forgiven by Boris loyalists for the part he played in his defenestration (Sunak quit as Chancellor literally minutes after Javid resigned as Health Secretary), every vote is seemingly a test of Sunak’s authority. Sunak has thus far taken a pragmatic approach, choosing compromise rather than risk open Tory rebellion. At times this has been mightily disappointing, such as when 'nimby' Tories were able to amend the Levelling Up and Regeneration Bill to remove top down housing targets; this may have been maddening to us who work in the development industry, but this is the reality of trying to govern without a mandate from the electorate.
In the Illegal Migration Bill, Sunak is residing over a unifying policy that brings together Conservative MPs and which resonates with the general public. Polling from YouGov published on the 17th of March shows that, irrespective of whether the term ‘illegal migrant’ or 'refugee’ is used, approximately 50% of people support the Government’s stance compared to about 30% who don’t. It turns out that Gary Lineker doesn't speak for the nation after all. What is interesting about the Illegal Migration Bill is that Labour, rather than objecting to the Bill in principle, are focusing on its effectiveness. No doubt there are many in Labour’s ranks and on the Left who deplore Starmer’s duplicity - as a Human Rights lawyer, Starmer successfully challenged New Labour government’s decision in 2003 to bar asylum seekers from claiming benefits. Starmer must, however, remain disciplined and tack Right on immigration if he wants to win back the Brexit voting Red Wall.
Perhaps a bigger test of Sunak’s authority will come on Wednesday when his Windsor Framework deal with the EU is to be voted on. It is significant that the Windsor Framework does not need to be voted through the Commons for it to be enacted, with existing legislation able to carry the provisions of the Framework. The fact Sunak is comfortable allowing a vote suggests that he is willing to test the resolve of hardline Brexiteers within his party. It is an indictment of politics that Tory Brexiteers were willing to vote through Boris’ inferior deal but could potentially kick up rough on the Windsor Framework simply because they do not consider Sunak to have the moral authority on Brexit. That fact is, Sunak was able to secure concessions from the EU which May and Boris could not.
The Tories have to be able to go into the next election stating that they have got Brexit done. Any hint that Brexit remains in question will test the patience of the electorate. For this reason alone Tory Brexiteers would be well advised to back the Windsor Framework. Crucially, though, the ‘Stormont break’, which allows the Northern Ireland Assembly to resist closer alignment with the EU on goods, requires support of the UK Government to come into effect. Although it is envisaged that the Stormont break would be activated only in special circumstances, it could in theory be used readily. Will we ever be able to move on from Brexit?
Rishi Sunak’s prowess on the world stage has also come into focus with the AUKUS deal with the United States and Australia, and the first UK-France summit in five years. Sunak is finding traction with his international contemporaries and by stepping on to the world stage Sunak has been able to benefit from the associated optics. At the next election Labour may represent the ‘change’ choice but they will also have to contend with being the inexperienced option having been out of power for 14 years. Sunak on the other hand will have had almost 2 years to demonstrate he is up to Governing and best placed to represent the UK on the world stage. With the electorate tired of uncertainty, all things being equal, a tried, tested, and competent candidate may well be a vote winner.
Sunak has been able to set the agenda in recent weeks in no small part down to the progress he has made on a range of issues. Although Boris always had a knack of setting the agenda, it was more often than not due to some scandal or misdemeanor, irrespective of whether it was contrived by his enemies or not. The only time you hear about or from Sunak is when he has something to say on the progress he has made. Sunak appears above party politics, solely concerned with fixing Britain's ills, or as he puts it, delivering on the people’s priorities. This is not to say that he is set to win the Conservatives an historic 5th election for the Tories are still a long way behind in the polls. He is, however, working for Britain and as our Prime Minister, we need him to succeed.
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