“The era of big government is here to stay”

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Rishi Sunak recently unveiled his much-anticipated budget, providing us with a clearer picture of how the Conservative Party wants to operate the economy as we emerge from the Covid-19 pandemic. Mr Sunak declared this budget as one fit for an “age of optimism” to turbocharge the economy, “unlock productivity” and to “deliver growth more evenly across the UK”.

So, what did this look like in practical terms? The Government has committed to a spending increase of £150 billion over the next three years, including £6 billion to tackle NHS backlogs, £7 billion for transport projects and £2 billion to help schools in England catch up after Covid-19’s devastating impact on children’s learning. In fact, the Government has committed to a real term rise in spending for every government department. To pay for this, Mr Sunak is raising taxes to their highest level since the 1950s, up by £40 billion this year, meaning increases in areas such as corporation tax and National Insurance contributions.

Some have labelled this as a shift in philosophy for the Conservative Party, from what once was a small-state, low-tax neoliberal party to a party of big government, more closely aligned with the Keynesian economics of tax and spend. However, opposition to both the budget and this supposed ideological re-alignment can be found within the Tory rank and file. Most notably, former minister Chris Grayling stated that Conservative backbenchers will be holding “the Chancellor’s feet to the fire” to deliver because they “cannot plan a future, as Conservatives, as a big-state, high-tax party”. Mr Sunak’s budget has exacerbated tensions with those who still view the Conservative Party through a Thatcherite lens, especially as it appears to be undoing the last decade of austerity measures that stripped back the state through huge cuts to public services.

Austerity measures were generally seen as necessary to balance the books following the financial crash of and subsequent economic downturn of 2009, but even as soon as 2013, a majority of people in the UK believed that the Government’s austerity measures were hurting the British economy. By 2018, polling conducted by Number Cruncher Politics showed a continuation of this trend. 66% of those surveyed stated that cuts to public spending had gone too far. Rather interestingly, 53% of Tory voters surveyed were also of the belief that these cuts had gone too far. Boris Johnson and Mr Sunak have recognised changing public sentiment and concluded that, based on political calculation, this is the correct approach for the Conservative party.

It was Mrs Thatcher who reshaped the Conservative Party to become the small-state, low-tax party most tend to think of it as today

We are living through an unprecedented crisis, one that has seen the Conservative Party rack up a bill of £350 billion, pushing borrowing to its highest level in peacetime. This follows an impressive Conservative electoral victory in 2019, which saw them gain seats in Labour heartlands. The Conservatives have recognised a dramatically shifting political landscape across the UK since the Brexit referendum. With a raft of new Tory backbenchers representing previous red seats, the Conservative Party is having to find a balance between a desire for greater investment to help with the government’s ‘levelling up’ agenda, and a suspicion of tax and spend economics that is ingrained within many backbenchers. However, there is good evidence to suggest that the Conservative Party is up for the challenge.

There is an argument to make that the Conservative Party is one of pragmatism rather than rigid ideology, enabling them to be highly adaptable when necessary. During the post-war consensus years, up until 1979, the Tories and the Labour Party agreed over policies such as strong state welfare provision for all and the nationalisation of industry and public utilities. It was Mrs Thatcher who reshaped the Conservative Party to become the small-state, low-tax party most tend to think of it as today.

The Conservative Party is a pragmatic, adaptable party, with a long history of shifting its policy positions, whether that be on the EU, as we saw with the Brexit referendum, or on the privatisation of industry. Throughout its history, the party has evolved with changing political winds, enabling it to win over voters and keep winning general elections.

Mr Sunak’s budget is another example of the Conservatives shifting direction to give them the best chance to remain in power. With rising inflation and supply chain issues impacting the livelihoods of many in this country, it remains to be seen whether this budget is enough to counteract that. It seems likely, however, that the era of big government is here to stay as the Tories begin preparing for the next election.

Image: UK Prime Minister via Flickr

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