If the Conservatives want to survive, they need to regain their economic credibility
Traditionally voters have trusted the Conservatives on economic matters. The party had a reputation for making tough choices to keep the nation’s finances under control, helping people hold onto more of their own money.
Now, people’s money is counting for less and less as inflation pushes prices up. And a YouGov poll put Labour ahead of the Conservatives on six out of seven economic trackers. For the first time, the same number of people think a Labour government led by Keir Starmer would be better at managing the economy as those believe the same of a Boris-Johnson led Conservative government.
Is it any wonder why?
The Chancellor’s Spring Statement offered neither jam today nor jam tomorrow. Taxes are at a 70-year high. Inflation a 30-year high. Growth remains low. Stagflation now stalks the economy. And worse is to come.
The Recruitment and Employment Confederation has said employers expect to reduce job creation because of the rise in National Insurance Contributions. The FSB reports that half of small businesses do not expect growth over the coming year.
Inflation may hit 10 per cent in the autumn. Interest rates must rise further.
Households across the UK are in for more pain, further depressing consumer spending. Analysts expect a prolonged period of anaemic economic growth.
But all is not lost. The Tories can tackle the cost of living, get growth going and regain their economic credibility.
They should start by reducing the tax burden. While the rise in NICs is likely to remain, the Chancellor should again increase the NIC threshold in his autumn budget. He might also consider bringing forward his promise to lower the basic rate of income tax to 19 pence on the pound, unless of course that was a fruitless pledge to appease the low-tax Tories on the backbenches.
Longer-term, the government needs to tackle two of the biggest costs families face – housing and childcare. It must reform planning once and for all to lower the cost of housing. The government should also row back the state’s involvement in childcare and encourage competition to reduce prices.
The Tories also need some policies to turbocharge growth.
We’ve heard much about post-Brexit deregulation but seen little in the way of action. In 2016 Boris Johnson said he objected to the “torrent of EU legislation…imposing costs of £600m per week on UK businesses”. In 2020, a survey by PwC, the professional services firm, said “over-regulation” was a top threat to company growth.
Yet here we are in 2022 and the Online Safety Bill is making its way through Parliament. The Culture Secretary has announced a new regulator for English football. The government tells retailers where they can and cannot place products in their stores.
Such regulation only serves to lower innovation and depress competition. We must urgently look at those rules dragging down our economy.
The Tories should also reverse the planned corporation tax rises for 2023, as I argued in these pages earlier this year. These tax rises will reduce the UK’s tax competitiveness, depress investment, and push businesses to lower tax alternatives.
May’s local elections will be a vote on the cost-of-living crisis and Partygate. The Tories will take a drubbing.
But, if the Conservatives start to lower taxes, help ease the cost of living and introduce some pro-growth policies, they could stand a chance in 2024, no matter who leads them.