UK inflation: Tory conference: Jeremy Hunt seeks credit

In some ways, Mr Hunt’s outpourings formed just another chapter in the bizarre Tory economic farce.

The Conservatives fuelled inflation with their hard Brexit, which has propelled food prices and import costs higher, and through their abject failure to control energy prices. Yes, other countries have also been troubled by inflation but the UK’s predicament has truly been something special, particularly given the Brexit part has been self-inflicted and the Conservatives’ inability to enable households to have affordable gas and electricity has been astounding.

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Then the Tories try to claim credit for a fall in inflation which is in large part down to base-year effects.

The Bank of England has hiked benchmark UK interest rates from a record low of 0.1% in December 2021 to 5.25% to tackle the UK’s sky-high inflation, going much further than some experts think is wise with this rise in borrowing costs. However, whether wise or not, the setting of interest rates and effect of such decisions are nothing much to do with the UK Government either surely. The Bank’s Monetary Policy Committee is supposed to have independence in setting rates and its target of keeping annual UK consumer prices index inflation at 2% is the same as it was when Labour was last in power.

We have been having to put up with the Tory tall tale on inflation for a while now but there was something about Mr Hunt’s latest offering that seemed more brazen.

Prime Minister Rishi Sunak has also been ramping up the bizarre Tory story on inflation in recent days.

So what did Mr Hunt have to say this time?

His comments about inflation were not surprisingly combined with musings about tax cuts, given some Conservatives have been slavering over the prospect of such reductions ahead of the next general election.

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Mr Hunt made much of what he portrayed as a decision to, for now, prioritise cutting inflation over tax cuts.

To many not steeped in the Conservatives’ mindset, tax cuts might be something of a bizarre notion given the enormous challenges ordinary people are facing and strains on public services. However, to the Tory diehards, it seems that they never stop thinking about tax cuts. Remember in the immediate wake of the global financial crisis - when the Liberal Democrats were as the Conservatives’ junior coalition partners seemingly persuaded things were so tight they had to U-turn on university tuition fees and value-added tax - the Tories delivered a huge reduction in the main corporation tax rate.

The dramatic corporation tax cut was supposedly meant to deliver business investment. However, it did not, as companies kept their hands in their pockets.

Seemingly with a nod to the clamour for tax cuts within the Tory ranks, Mr Hunt said on Monday: “So right now, we’re focused on bringing down inflation. Nothing hurts families more when it comes to the weekly shop, heating bills or pump prices, which is why the Prime Minister has pledged to halve it.

“And we’re getting there. It was 11%. It’s now down by 40%. The plan is working and now we must see it through, just as Margaret Thatcher did many years ago.”

He added: “Conference, when we halve inflation, that’s not a 1% income tax cut, it’s a 5% boost to incomes compared to if it stayed the same.”

Presumably he means a cut of one percentage point in the rate of income tax.

That aside, what is remarkable about his comments is his shameless attempt to claim credit for the Tories in relation to the fall in inflation.

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The Conservatives helped fuel inflation. It is difficult to see anything at all they have done to bring it down.

And what might not be immediately clear to people from Mr Hunt’s speech is that the sky-high inflation seen in the UK is permanently baked in. Prices are still rising at a rapid rate, albeit not as sharply as they were. In October 2022, annual UK consumer prices index inflation hit a 41-year high of 11.1%.

While Mr Hunt did not promise immediate tax cuts, he did signal they might be in the post. This is no surprise, given not only Tory proclivities but also the proximity to a general election and the Conservatives’ lowly showing in the opinion polls.

And Mr Hunt’s speech included nonsensical swipes at what the Tories seem to view as the usual easy targets, in the forms of the public sector and benefit claimants.

It was in the context of the public sector that Mr Hunt raised the prospect of tax cuts, talking about saving £1 billion next year by “freezing the expansion of the civil service and putting in place a plan to reduce its numbers to pre-pandemic levels”.

He said: “If we increase public sector productivity growth by just half a per cent, we can stabilise public spending as a proportion of GDP (gross domestic product).

“Increase it by more and we can bring the tax burden down. Half a per cent - now for those of us with private-sector backgrounds, that doesn’t seem too much, does it? In the public sector, I’m telling you it’s harder. But we are up for the challenge.”

It is worth noting that £1bn per annum might sound like a lot of money but, in terms of what it would deliver by way of tax cuts, it is not.

Mr Hunt appeared to be grandstanding brazenly to the Tory faithful, going through their checklist of likes and dislikes like a bingo caller.

The reality of the situation is that the Tories played a big part in driving up UK inflation and should most certainly not be attempting to claim any credit for its decline from excruciating levels, as households and businesses continue to have to bear the burden of sharp rises in prices.

What we should also realise is that the Conservatives continue to have no credible plan for growth, and that is bad news indeed for living standards.