Politics: the pause ends

By Richard North - September 20, 2022

Real politics – or as real as they will ever get – resume today, possibly leaving us with a sense of nostalgia for the past 10 days when politics were suspended in what has become known as “the pause”. Those of us who were yearning for a speedier resumption may find that this is the classic example of needing to be careful what we wished for.

Warming up for the off, as one might expect, is the Guardian, with an article headed: “‘Who pays?’: Labour go on the attack over Truss’s energy plans”.

With The Replacement off to New York, and admitting that a US trade deal could be years away, we see here the now familiar theme, putting Labour in the frame.

The Party is questioning The Replacement’s economic plans in advance of this week’s energy package and mini-budget. The complaint is that the new prime minister has not detailed how she will fund her price freeze after ruling out a windfall tax.

Leading the attack is Pat McFadden, the shadow chief secretary to the Treasury, who is highlighting the difference between Labour’s proposals to fund an energy price freeze with a windfall tax on oil and gas companies and the Conservatives’ unfunded plans.

Not unreasonably, he is complaining that the Tory proposals will probably be paid for by borrowing, leaving working people to pay the bill “for years to come”. The “fundamental question”, McFadden asks, is “who pays, and what do you get for it?”

The Telegraph is also on the ball, noting that, with national mourning at an end, the harsh reality of the country’s difficulties will be apparent once more. Thus, it says, we will see a rush of government announcements intended to fulfil some of the promises made by The Replacement during her campaign for the premiership.

From the more sympathetic perspective of this paper, there are three crucial issues to be addressed immediately. The first is the detail of the financial help to businesses to deal with soaring energy prices.

The second is the crisis in the NHS, with new Health Secretary, Thérèse Coffey, expected to set out her plans for what she has defined as the service’s ABCD – ambulances, backlogs, care, doctors and dentists.

The paper argues that the issues in our health services are so deep-seated that a dose of reality must accompany Coffey’s plans, with less of the sentiment normally attached to political utterances about the NHS.

Then, on Friday comes the big event with Kwasi Modo ready to unveil an emergency fiscal package, including cuts in National Insurance and corporation tax, and other measures. In the view of the Telegraph it is no exaggeration to say that the next few days will define The Replacement’s premiership for the rest of this parliament.

If we take the cue from the Guardian, these next few days may well define the opposition’s attack plans for the immediate future. While The Replacement and Kwarteng are keen to frame their plans as a move towards promoting growth at all costs, we are told, McFadden questions this approach, claiming that the Tories are out of ideas after 12 years in power.

“It’s just another zigzag in the record of low growth over which they have presided,” McFadden says, adding that the government’s “record on economic growth has been a failure”.

In other words, this is more of the same, the usual tired rhetoric that accompanies the biff-bam of party politics, typified by the tired hack Polly Toynbee, also in the Guardian, who writes that “This week we will see Truss unchained. Labour must be rubbing its hands with glee”.

She sees the constant news of policies from the prime minister’s desk, tumbling out of Downing Street during the official mourning period, as a cornucopia of gifts to Labour.

A rush of announcements this week, she writes, will probably reveal perverse policies, mostly unpopular, even among Tory voters. Strung together, in Toynbee’s view, The Replacement’s “remarkable list” of free market, state-shrinking, deregulation, anti-nanny state ideological totems show her to be a conviction politician of striking recklessness.

Toynbee asserts that many assumed after winning the leadership, The Replacement would ditch the wilder red meat she threw to Tory party members. But no. She seems bent on drawing lines with Labour; there’s no sign of pragmatism.

Abolishing the cap on bankers’ bonuses as a first gesture, she adds, will brand her for life. Disgust at out-of-control top salaries runs deep, and FTSE 100 CEO pay rose by 39 percent last year, according to the High Pay Centre.

A Big Bang 2.0 is designed to release the animal spirits of the City and boost their already colossal earnings. But these dark times are no moment to reprise the 1980s, with boys in red braces popping champagne corks.

Even the City grandee banker Sir Win Bischoff, Toynbee says, tells the FT that “it doesn’t make us more competitive … It’s more of a symbolic gesture.” But, she adds, it is not a symbol to please the public. Championed as ripping up “EU red tape”, a bankers’ bonanza was probably not the dividend that Brexiters in Barnsley or Bolsover, nor even Buckinghamshire, thought they were voting for.

And so she goes on, although she has a point about the bankers’ bonuses. After the furore about overpaid water company CEOs, there are possibly more naff things that The Replacement could countenance, but it would be hard to think what that might be.

But, one by one, she picks away at The Replacement’s treasured nostrums. Most do not back a cancellation of the upcoming corporation tax rise, she says. Previous corporate tax cuts did little to boost business investment, which has actually declined over the past two decades despite the UK having among the lowest tax rates in the EU, says the Institute for Public Policy Research.

Not even personal tax cuts will be popular, she asserts. Labour focus groups show voters are far more anxious about failing public services and well aware that rich people benefit most. Refusing to impose a windfall tax on profiteering energy companies is greeted with indignation, while the EU targets windfalls of €140 billion. Nor is there much public appetite for re-opening warfare with the EU.

Interestingly, though, we don’t have to rely on Toynbee. The Times also cites the analysis by the Institute for Public Policy Research, confirming that it is casting doubt on the government’s central assumption that keeping corporate taxes low will boost investment and bolster growth.

While Kwarteng argues that lower taxes on companies’ profits lead to higher business investment, which spurs faster growth, the IPPR insists that the evidence of the past 15 years was that repeated cuts to the corporation tax rate – from 30 per cent in 2007 to 19 per cent since 2017 – had not led to higher private investment or growth. It says that most developed economies have both higher rates of corporation tax and higher levels of private sector investment than the UK.

As we emerge from the pause, therefore, The Replacement will be faced with a number of challenges from not just one but multiple sources. The pause may have given her temporary relief, but we may be about to see the blood flowing.