Speaking via a voice scrambler, the Chancellor’s handler, Herr Schwab, carried on, “We cannot have Britain competing and acting independently of the G7. The British economy will now suffer a longer and deeper recession than had you not stood up last Thursday and delivered your Autumn Statement. Britain has been brought to heel. Your future as a European Commissioner is assured and President Macron will announce your award of the Legion of Honour after the general election.”
I’ve no reason to believe such a conversation ever took place, but it might as well have. Chancellor Jeremy Hunt excelled himself in managing expectations before announcing his tax increases. Not only did he not raise taxes as much as was being briefed to select members of the media all too happy to receive exclusive scare stories unquestioningly – he also surprised everyone by increasing public spending.
There were no cuts in spending, instead the NHS, social care and education were each given unexpected boosts totalling over £5.5bn per year. Yes, there are reductions in the planned increases for government spending after 2024 – but that’s after the next general election and planned spending will anyhow still increase by 1 per cent year on year – that is certainly not austerity.
And there you have it, as I have been saying repeatedly for the last three weeks, there is no black hole. If there is a looming great public finance crisis you can’t just spend your way out of it and promise to pay it all back later.
Imagine telling your credit card company you’re sorry you’ve gone well over your limit, but the way you plan to solve the problem is not to cut up the cards and agree to a repayment plan but to increase the limit for the next couple of years and hope something will come along because your financial advisers have modelled some economic scenarios that say you will be alright. And hey, if it doesn’t work out your children and grandchildren will pay off your card for you.
The fantasy of the black hole in the public finances is a result of economic modelling by the Government’s pet agency, the Office of Budget Responsibility (OBR). Last year the OBR said inflation would peak at 4.4 per cent and the UK deficit would be £183bn when it was £133bn – a shortfall of £50bn – both figures were wide off the mark and shown to be so before Russia’s invasion of Ukraine. Inflation has now gone past 11 per cent and is not thought to have yet peaked. We still face further interest rate rises as the US may yet increase its rate again and to stop Sterling falling we would have to follow suit.
The OBR’s modelling is repeatedly wrong, yet for Rishi Sunak’s government it is presented as sacrosanct and used to justify tax rises we don’t need.
In contrast, let me offer my own political, rather than economic, modelling, for 2024. The Conservative government owes its 80-seat majority to the Brexit Party, which withdrew all of its candidates in the 2019 general election in those seats already held by Tories.
This calculated and generous gesture ensured Farage’s candidates did not split the vote in what was the “Get Brexit Done” general election. It resulted in Labour losing key seats in its northern red wall and the Liberal Democrats did not unseat Conservatives in Remain-leaning constituencies.
When the next general election comes the Brexit Party’s rebranded replacement, Reform UK, will cut no deal to save Conservative skins. Brexit has not been done, at best it has been botched, and on many issues, betrayed. In the next few years Sunak and Hunt will do everything in their power to align the UK with the EU so there will not be a scintilla of difference between the Conservative and Labour parties’ approach to making Brexit work.
Reform UK will be the beneficiary of rising discontent from Conservative supporters, many of whom are already signing-up as members after abandoning their party of choice over decades. With Sunak becoming the natural heir to Tony Blair it is now even possible for Keir Starmer to offer modest targeted tax cuts that will make the Conservatives look stupid.
With a vacuum developing on the centre-right, Richard Tice’s Reform could step in and fill that space. It may not win any seats – it is too early to predict how individual constituencies will play out – but it should certainly win enough votes to stop the Conservatives holding many of theirs. In 2005 UKIP was calculated to have caused the Conservatives to lose 27 seats to Labour.
In such circumstances the 2024 result will be a Labour landslide, while the Liberal Democrats will win seats in the Conservative-held shires. Conservatives face a wipe-out leaving them with fewer than 100 seats.
Ironically, this is a catastrophe for Nicola Sturgeon – because if England and Wales is certain to turn red and orange why would Scots need or wish to vote “independence”? And even if an election looked close, the best way to get the Tories out would be to send Labour rather than nationalist MPs to Westminster. Thus, the prospect of a Labour government will kill stone dead Sturgeon’s idea of using a general election as a proxy referendum, humiliating her and her party in the process.
There was and is no black hole. It was a figment of the Westminster bubble, a narrative created to justify Sunak and Hunt changing the direction of the Conservative Government. But they cannot outsmart the British people and shall pay a heavy price for their too clever by half political games to gain power without a mandate.
Brian Monteith is a former member of the Scottish and European Parliaments and a Senior Adviser to the Tax Reform Council