There’s no way back for the Tories after this. But it doesn’t change the fact that Jeremy was correct




dmg media (UK)


DESPONDENTLY, a Tory backbencher declared: ‘It wasn’t an Autumn Statement. It was a surrender statement.’ A colleague was equally downbeat: ‘Liz Truss and Kwasi Kwarteng dug us a very big hole. And we’re going to need a very, very long ladder to get out of it.’ The consensus in Westminster – among both Labour and Conservative MPs – is that there’s no escape. Soaring taxes and interest rates, coupled with plummeting growth, will eventually see the end of Rishi Sunak’s premiership and his party’s decade in power. ‘We’ve been in government 12 years,’ one Minister said, ‘and the political cycle is about to change. That’s not really a bad thing. That’s what makes our democracy work.’ The reaction to Jeremy Hunt’s first major outing as Chancellor may have left him wondering if he’d be better off sitting in an Australian jungle, munching on a camel’s penis. ‘Carnage’ was one of the less hostile headlines. ‘You’ve never had it so bad’ another. But, as Tory MPs begin glumly dusting off their CVs and phoning up corporate headhunters, one thing is being overlooked. Jeremy Hunt was right. First, he was correct in his analysis of the primary drivers for the impending recession. In a tubthumping response, Shadow Chancellor Rachel Reeves chided: ‘No one is to blame except the Government that has been in power for 12 years – [for] more taxes, more inflation, higher mortgages.’ But the truth is that others are indeed to blame. Hunt’s attempt to frame the impending downturn as a ‘recession made in Russia’ will understandably get short shrift from voters struggling to keep the heating on. But as the Office for Budget Responsibility (OBR) – whose forecasts Labour are treating as tablets of stone – made clear, it is Vladimir Putin’s invasion that ‘has taken much of the wind out of the global economic recovery’. The other culprit is Covid. Estimates of the additional public spending needed to deal with the pandemic range from £300billion to £400billion. That’s effectively a £6,000 Covid tax on every single person living in Britain. But Hunt’s critics – many of whom didn’t just support lockdown and furlough, but argued fiercely for major extensions of both – seem to view that staggering expenditure as Monopoly money. It isn’t. As one Treasury official explained: ‘We’re spending £120billion every year on debt interest alone. That’s money we could be spending on schools, hospitals and police. But we’re not. We are spending it on servicing our borrowing. And that just isn’t sustainable.’ Hunt was right on a second point. The primary risk to the British economy isn’t stagnant growth. Or high taxes. Or inadequate public expenditure. It’s inflation. Boris Johnson ignored its menace. Liz Truss poured petrol on it. But at long last, someone in Government has decided to confront the real ‘stealth tax’. ‘Inflation is insidious,’ a Minister told me. ‘It eats away at everything. It erodes spending. It cuts wages. It drives up interest rates. That’s why we have to get on top of it.’ Hunt’s opponents – some of whom can be found on both Labour and Tory benches – accuse him of overreacting to inflation, which they argue is principally driven by soaring energy prices, which are beginning to stabilise. But as a Treasury source outlined: ‘Yes, energy prices have fallen back a bit. But they’re still five times above where they were pre-Covid. As a country, we’re spending eight per cent of GDP on energy alone.’ And Hunt was right on one final point. Politically unpopular though it will be, his Autumn Statement was fair. To judge by some of the reaction, you’d have thought the Chancellor had announced the abolition of every public service in the land. ‘Austerity 2.0!!!’ screamed Labour. But as Hunt explained, under the Cameron-Clegg coalition of 2010-15, spending fell by three per cent a year. And despite today’s bleak economic outlook, under the Government’s current plans, public spending is actually set to increase by three per cent a year. Yet for some that’s still not enough. Consider, for example, the sacred cow that is the NHS. Even before Thursday’s statement, NHS spending was set to rise from £156 billion in 2021-22 to £176billion in 2024-25. But as a result of Hunt’s ‘austerity’ budget, it will receive an additional £3billion in each of the next two years. Or welfare. Defying predictions that he would wield the axe, Hunt announced that working age and disability benefits would rise in line with inflation, at a cost of an extra £11billion. In addition, he confirmed that the National Living Wage will rise by 9.7 per cent – an increase of £1,600 for some of the lowest earners. Labour’s response? ‘This is the everyday nightmare of Tory Britain,’ roared Rachel Reeves. Though not all the attacks came from the usual suspects on the Left. The Chancellor had taken ‘the easy option’, Jacob Rees-Mogg scolded. ‘What we actually need to be doing is having a strategy for growth and looking to lower taxes.’ Which is odd. Because someone looking and sounding remarkably like Jacob Rees-Mogg was sitting on the Government front bench just weeks ago when Kwasi Kwarteng announced precisely that strategy, sending the financial markets and Tory poll ratings into meltdown. As one Minister said to me: ‘Where have these guys been over the past couple of months? Have they been asleep?’ If they have, the Chancellor has just thrown a bucket of cold water over them. Actually, he’s thrown one over the whole country. But in truth, there was little else he could do. The Magic Money Tree has finally collapsed under its own weight. Politicians on both the Left and Right may spend the next few months and years scrabbling around, trying to prop it back up again, but the days of hiding economic reality behind boosterish speeches, or fantastical policy prescriptions, or financing everything on the never-never, are over. Last Thursday will probably go down in history as the day that the Conservative Party lost the next General Election. And as a result, Hunt will shoulder his share of the blame. That would, however, represent an unjust verdict. The political and economic circles simply could not be squared. As the implosion following the Kwarteng mini-Budget showed, the tax cuts necessary to stimulate growth and stave off recession were not deliverable. Major spending cuts, coming so soon after the genuine austerity of 2010-15, were not viable. There was no way to outrun the perfect storm of Covid, war in Ukraine and the cost-of-living crisis. Which is why the Chancellor set himself three more realistic goals. Restoring the Government’s battered credibility with the financial markets. Protecting the most vulnerable, and the public services they most heavily rely on. And starting – finally – to bear down on the mammoth borrowing that carried Britain through the Covid crisis. He delivered on them. Which is why one Tory MP I spoke to after the statement still clung to a flicker of hope. ‘People in my constituency are realists,’ he said. ‘They understand the things we’ve been dealing with. I still think they may give us the benefit of the doubt.’ They won’t. After 12 years, the political pendulum is poised to swing again. If the Office for Budget Responsibility’s dire growth projections are anywhere near accurate, there is no way back for the Government. But it won’t change the facts. Jeremy Hunt has probably cost the Tories the next Election. But he was right.