Good morning from New Economy Brief.
There wasn’t a lot of economic policy announced at Conservative Party Conference this week (which is a story in itself), but the outline of the Conservative’s economic argument at the next election is becoming clearer. This week we look back at the conference and map the contours of the ‘new approach’ which will underpin the party’s electoral strategy in 2024.
Sunak, Agent of Change? Rishi Sunak’s speech to the Conservative Party Conference floor focused on the idea that politics and the way decisions are made need to change, and that Keir Starmer and Labour embody the last 30 years of status quo politics. How credible that is after 13 years of Conservative government will be questioned, but Sunak’s argument was that Britain needs a new politics of bold, pragmatic and radical decisions that prioritise the country’s long-term future, and that he is the man to deliver it. That’s the pitch, but how do the new policies announced at Conference map onto this rhetoric?
The Conservatives’ wider macroeconomic and electoral strategy. Chancellor Jeremy Hunt explained a key part of the party’s economic strategy in his conference speech, where he asserted that any new borrowing would be inflationary, and that cutting inflation is the best way the government can help families with the cost of living. This positioned Labour’s spending plans (particularly their £28bn Green Prosperity Plan) as potentially inflationary and therefore against the interests of cash-strapped working people, sharpening the Conservative dividing line on spending ahead of the Autumn Statement.
What does it all mean? The Conservatives are betting that positioning their party as a new ‘agent of change’ will bring them electoral success (though it looks like the public aren’t buying it). As the FT’s Steven Bush explains: “That many of his priorities offend other Conservatives, and cause high-profile rows, only helps to establish the perception that he is a changed Conservative leader and this is a reformed Tory party.” However, he concludes, “for a political message to work it has to align with the policy reality”, and here there is a growing disconnect between the rhetoric of long-termism, and an approach which has mainly involved pushing back climate action and cancelling a large infrastructure project.
A new spending category? Creating a new category of preventative spending could avoid short-term thinking in the Treasury, argues Demos. Currently, government spending is split into long-term capital spending and day-to-day ‘resource’ spending. The think tank argues that adding a third category would make it easier for the government to allocate resources to things like children’s social care, where evidence shows that early intervention is a cheaper and better policy, nipping problems in the bud that will otherwise get far more painful and expensive.
The gender wealth gap. Like income, wealth is unequally distributed between men and women, according to the Women’s Budget Group. The new report argues that higher taxation of wealth is a “feminist issue because it can help reduce the gender wealth gap and, at the same time, raise public revenue to strengthen our social infrastructure”.
Raise taxes to raise incomes? New calculations by the Institute for Public Policy Research (IPPR) show that countries with higher taxes than the UK achieved better living standards over the past decade. Contrary to the argument that cutting tax helps lower the cost of living, higher taxes are associated with a higher average post-tax disposable income in countries like France, Germany and Denmark.
Inheritance tax polling. Most people oppose any reduction in the £1 million inheritance tax threshold, new polling commissioned by the Trades Union Congress (TUC) suggests. Only 20% support a reduced threshold, while the remaining 60% want it to either remain where it is or increase, according to the survey conducted by Opinium.
A long-term approach to Universal Credit. Universal Credit is “simply inadequate to meet day to day living costs” and requires a “mission-led approach”, argues a new report by the IPPR. It recommends setting up a new independent body for social security which would “review progress and hold government to account on agreed commitments”.
The reality of social security. New qualitative research by the New Economics Foundation explores the “dynamics between everyday life and social security” for women living in poverty in Liverpool and Manchester. It finds that the income safety net is “threadbare”, that “punitive policies limit women’s autonomy” and that “conditionality and an inability to find childcare that fits with good work lock families in poverty.”