James Forsyth

Ending austerity won’t be as simple as May made it sound

Ending austerity won't be as simple as May made it sound
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It was the line in her conference speech that demonstrated Theresa May’s desire to stay on as Prime Minister after Brexit. But it was also the line that will cause her the most trouble.

I say in The Sun this morning that May’s declaration that austerity is over will cause problems even if the Tories couldn’t have fought another election on austerity.

First of all, they have already pledged to spend an extra £20 billion on the NHS. At the time, many senior Tories regarded this as the party making a choice to spend ‘the proceeds of growth’ on the health service. But by now announcing the end of austerity, May has suggested that the taps will be turned on elsewhere too.

The problem is that even before May’s speech, Hammond was saying that the country is going to need to pay a ‘little more tax’ just to cover the increase in NHS spending. If other services are going to get a big boost too, then that is soon going to turn into a lot more tax. Expect Hammond to make this point when the Cabinet discuss this month’s Budget on Tuesday. ‘Number 10 and Number 11 are not singing from the same hymn sheet’, admits one well placed Tory.

But tax rises are not politically deliverable, and they’re a bad idea to boot. It is worth remembering that even when the Tories had a majority, Philip Hammond had to abandon his plan to raise National Insurance for the self-employed. Also, is it sensible to raise taxes still further when the tax burden is already at a thirty-year high? The best Tory answer to the cost of living crisis is to leave more money in people’s pockets.

So, what should the Tories do given the military, the police, prisons and local councils all have good claims to a funding increase? Well, the answer must be to get the economy growing faster. That means planning reform, incentivising investment and backing our world leading universities.

If they do this, the Tories might find out just how many problems 3 percent growth can solve.