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The problem taxing the Tories

26 May 2018

10:46 AM

26 May 2018

10:46 AM

Political Cabinet on Tuesday was treated to a polling presentation that highlighted the dilemma the Tories are facing. When voters are asked what the most important issue facing the country is, they reply Brexit and the NHS. But when they are asked what the most pressing issue for them personally is, they say the cost of living. And what’s the most popular Tory policy since the election? The stamp duty cut for first time buyers.

As I write in the Sun this morning, the political implications of all this is clear: Voters, who are most worried about the cost of living, won’t thank politicians who hike their taxes.

Several of the Cabinet Ministers present on Tuesday have told me that they believe that this worry over the cost of living means any tax rise, even one explicitly designed to allow more spending on the health service, won’t wash with the public.

This leaves the question of how to fund the extra money for the health service? If tax rises are off the table, are you going to make cuts elsewhere? But it is pretty much impossible to see where in the rest of the government budget, the kind of savings needed to fund this NHS increase could come from. Many ministers think the answer to this problem is obvious: let the deficit take the strain. One tells me, ‘It is time for politics to re-enter the Treasury’.

But those around Philip Hammond have little time for this argument. They think that deficit spending is, inherently, unsustainable. They also worry about going into Brexit with the deficit rising.

Number 10’s position is less clear. Theresa May has always been relatively hawkish fiscally. But her powerful chief of staff Gavin Barwell is, as one insider puts it, ‘definitely on the wet side of May’ and keener on spending increases.

There’s no easy solution to this Tory dilemma. But what is being overlooked is how growth could help them out.

If the Tories went, for instance, for big bang planning reform they could give the economy a real boost: making it easier for them to spend more and still balance the books.

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