The Tories’ dilemma: to spend or not to spend

While the rest of the country waits for this spring to arrive, in Westminster the talk is all of spring 2019. That’s when the United Kingdom formally leaves the European Union, and when a slew of cabinet ministers think the Tory leadership contest will begin in earnest. But something else will happen in the spring of next year that will be almost as important: the review setting out departmental spending from 2020 to 2023.

It will reveal how the Conservatives intend to fight the next election: do they plan to take on Jeremy Corbyn with a no-new-taxes pledge or will their strategy be to say that they are increasing spending but more responsibly than Labour would? When I asked one minister which approach the cabinet would plump for, I was told: ‘That matter is up for debate and is heavily contested ground.’

I understand that roughly a third of the cabinet favours tax rises to pay for increased spending, a third favours spending restraint and no new taxes, and another third is undecided between the two courses.

The Office for Budget Responsibility’s deficit projections assume that government spending will simply rise in line with inflation, but it isn’t hard to see where and why there’s mounting pressure for above-inflation increases. The most obvious of these is the health service. There is now near-universal acceptance on the Tory side that the NHS is going to need substantially more money in the coming years. It is not just Boris Johnson who is banging this drum. Jacob Rees-Mogg, the most fiscally conservative of those tipped to run for the leadership, has gone out of his way to make clear that he, too, is sympathetic to the idea of extra cash for the health service.