Has Jeremy Hunt done enough to put Tories back on track?

The Chancellor ridiculed the “declinists” and claimed his steady-as-she-goes approach was working with the OBR’s latest prediction, that Britain will avoid a “technical recession”.

Punters, however, weren’t popping the champagne corks. While there may not be two consecutive quarters of negative growth in 2023, the economy is set to shrink by 0.2%. Inflation is, thankfully, forecast to fall from 10% to below three by the year-end but this is mainly due to lower energy costs and not UK Government policy.

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Amid Mr Hunt’s cheery demeanour, the Resolution Foundation brought us back to reality, firing off a salvo of depressing figures, noting how Britain had endured a disastrous decade for living standards with household disposable incomes set to remain lower by the end of the forecast period in 2027/28 than they were pre-pandemic in 2019/20.

It pointed out taxes as a share of GDP were on track to hit a 70-year high of 37.7% by 2027/28; a 4.7 percentage point increase since 2019/20, which, wait for it, is equivalent to almost an extra £4,200 for every household in the UK.

For England, a chunk of this is down to frozen tax thresholds with, the IFS think-tank calculating this year, those on modest wages being £500 worse off while those on higher ones £1,000 worse off. Mr Hunt’s vague response was to say, while Conservatives wanted to cut taxes, the tax burden would be higher “for a while”.

The extra £29bn paid in income tax and National Insurance in 2027/28 is the equivalent of raising income tax by 4p in the pound.

Labour has chosen to fight its main Budget battle on Downing St’s decision to scrap the tax-free cap on the lifetime pensions’ allowance.

Mr Hunt took to the airwaves to explain his plan would help stop senior doctors from retiring early and reduce the £3bn annual bill for locums. The plan will cost £1bn a year and keep 15,000 people away from early retirement. Hopefully.

Striking education workers (Image: FREE)

However, the cost is eye-popingly high; economists say it will cost £80,000 per worker. Sir Keir Starmer denounced Mr Hunt’s move as a “pensions bung for the richest 1%”.

Undoubtedly, there will be a lot of heat when a Commons vote arrives on Tuesday. The Chancellor suggested Labour was guilty of hypocrisy, given Wes Streeting, its health spokesman, had argued last autumn for a pension tax-break for doctors to help with retention.

But Labour’s argument is the Chancellor should have tailored it more directly at doctors as it did a while back for judges. The comrades have made clear, in power they would reverse the Tories’ blanket move.

Mr Hunt dismissed as “rather bizarre” opponents’ claims the Budget had been aimed at the wealthiest 1% as he pointed out the Government was spending £94bn this year on helping people, giving around £3,000 in cost-of-living support to a typical household, including uprating benefits with inflation, one-off payments to people on low incomes of up to £900, extending the energy price guarantee extension and implementing another fuel duty freeze.

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Indeed, much has also been made of the Chancellor’s decision to spend £6bn on freezing petrol duty yet again when, on Budget Day, thousands of public sector workers were on marches, demanding better pay.

Intriguingly, public sector pay was absent from Mr Hunt’s Budget speech; perhaps because talks with health unions were at a delicate stage. Yesterday, union leaders announced they would recommend a new pay offer to their members.

If a deal is struck, then, coming on the back of the Northern Ireland Protocol agreement with the European Commission – the first Commons vote on the issue is due Wednesday – some Conservatives will insist the PM is beginning to deliver.

Yet, of course, in some regards the political bar of success set for Mr Sunak by the likes of Boris Johnson and Liz Truss is not terribly high. Indeed, one business lobbyist put it – somewhat graphically – that the PM “could stand at the podium and soil himself and he’d be doing a better job than his predecessors”.

The hope now for Downing St is that there are no more unexpected shocks ahead of the 2024 general election; political revival will be hard enough as it is. Worryingly for Tory HQ, a poll this week said Labour was more trusted on the economy in those all-important red-wall seats, meaning they look set to return to Sir Keir’s party; all 45 of them.

The next key fiscal event will be the pre-election Budget when Mr Hunt will be looking to give the country and, of course, the Conservatives, a timely economic lift.

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The Chancellor sought to play down the prospect of tax cuts, saying he was “not interested in playing games” and any “electoral dividend” would be the result of “doing the right thing for the economy”. Yet he also made clear he wanted to cut taxes “as soon as possible”. I wonder when that might be.

The political reality is that, given the historically high tax-take, nurturing a feel-good factor before any poll is extremely helpful, if not essential, for electoral success.

While Mr Hunt seeks to give the impression of being a reassuring, steady hand, confidently pulling levers to begin the slow, delicate process of lifting Britain back into growth – and, he hopes, simultaneously keeping the Tories in power – only time will tell if he succeeds against the political odds.

Or, could it be, once the Treasury curtain is pulled back, the Surrey MP turns out to be nothing more than the hapless Wizard of Oz?