The latest inflation figures have sent Tory MPs into a tizz again, unsurprisingly. There are a number of things that they're upset about: the first is the ongoing refrain that their party should be cutting taxes, not imposing the highest tax burdens in living memory. Another is that Universal Credit is largely 'an unfinished project', in the words of one Red Wall backbencher who sees the impact of the malfunctioning benefit on his constituents. What both of these complaints have in common is that MPs feel the Treasury is deliberately pursuing the wrong policy: arguing that now isn't the time to cut taxes and choosing to spend money on grants for low earners rather than targeting the help through what is supposed to be a very responsive benefit.
When I spoke to former Conservative leader Iain Duncan Smith about the first point, he was concerned not just about the tax burden but also about the way in which Boris Johnson seems to be losing the argument with Rishi Sunak on a regular basis. Few Tory MPs voted for Johnson to be their leader on the basis of his grasp of economics – but they did expect him to do what he did so successfully when mayor and cover his weaknesses by turning to expert advisers. IDS thinks the Prime Minister is failing to do that in Downing Street. He said:
“What they need to be doing at the very least is cutting business taxes, and try to get the basic rate of income tax down. They can afford all of this, the government is wrong when they say they can't afford it, or that it will feed inflation. We face a stark choice: to ensure economic growth or risk recession. The Conservative party is united in the need to reduce the heavy burden of tax. The Chancellor, as a politician, must understand the damage that going into a recession will do for our prospects. No. 10 is outgunned by the Treasury and the PM should have an independent economics guru: Thatcher had hers, Alan Walters, who told her to get the economy moving again rather than tighten it. Boris needs someone like this too so he can stand up to the Treasury orthodoxy.
When Johnson was in City Hall, he had Gerard Lyons as his chief economist – and indeed he has brought Lyons back in on occasion to try to out-argue Sunak when it comes to offering help with the cost of living in his spring statement. But the Treasury has more recently managed to shut down most talk of tax cuts – hence this complaint from IDS and others.
The Treasury as an institution has also never really been signed up to Universal Credit. When IDS was introducing it, he had a personality clash with Chancellor George Osborne, who reportedly didn't think him bright enough to be able to master the complexity of this reform. But there were also the standard Treasury gripes about shelling out even more money on benefits than before with the promise – rarely believed in this part of Whitehall – that the upfront cost would save money in the future. In the end, Osborne took the money out of UC anyway.
Six work and pensions secretaries later, Therese Coffey is still very committed to UC and has had her own clashes with Sunak over it. But backbenchers representing particularly deprived constituencies have two complaints: one is that it is taking forever to move legacy benefits over; and secondly that the government should introduce automatic uprating of the benefit to make it more responsive. One Red Wall MP says: 'It's an unfinished project. Lots of people are agitating to get it done, but HMT just aren't interested.' That's not a view shared by those in the Work and Pensions department, who argue UC is now working pretty well and point out that the Budget announcement cutting the taper rate from 63 per cent to 55 per cent has made a big difference. On the uprating of benefits, Work and Pensions Secretary Therese Coffey – herself not immune to clashes with the Treasury – has a statutory review in the autumn.
As Kate explained yesterday, the cost-of-living crisis is going to get worse over the coming months, which means the pressure from backbenchers on tax and benefits is going to get stronger. Will Johnson listen to their advice and try to stand up to his Chancellor, who is after all politically wounded as well after the past few months? Perhaps it suits him not to– after all, it's always nice to have someone else to blame.
P.S. Iain Duncan Smith’s words first appeared in my Evening Blend email, which is a free round-up and analysis of the day’s political events, plus a diary on what to expect next. For more exclusive stories and insider insight from the best-read politics email in Britain, sign up here.