Comment

The Tories' economic mismanagement has doomed us all

Neglect of basic Conservative principles means we are now heading for a recession

As it turns out, ‘fix the roof while the sun is shining’ wasn’t just another political catchphrase. It was a critical piece of advice that no one took, and now we find ourselves in a terrible mess. 

After being told that the financial crash and the pandemic were both ‘once in a generation’ events, we are looking down the barrel of possibly a third major hit to the economy in just over a decade, and we are running out of levers to pull.

Or, to be more accurate, we are running out of levers the government is willing to pull. There’s no doubt that the past two years of emergency measures and lockdowns have made politicians from all parties more comfortable with the idea of splashing the cash in response to a crisis, but their unwillingness to consider bolder free market reforms goes much further back than Covid-19.

The Tories have been in office for 12 years. Yet we still have extortionate childcare costs, rising energy bills, and a housing system that operates more like a cartel than a market due to an extreme under-supply of homes. 

These are all policy areas that have been in desperate need of reform for decades – not just to bring down costs, but to jumpstart economic growth and kick the economy into gear too.

Yet these issues haven’t been tackled in any substantive way. In too many cases, they’ve been made worse.

This is partially the fault of a passive Tory party that has wanted to avoid internal political battles at all costs. But it also highlights a consistent theme throughout the Tory premiership: that despite rebrands and revamps, the party has failed to recognise the importance of economic growth.

Yes, they’ve paid lip service to it. David Cameron promised to launch the ‘battle for the future of Britain and our competitiveness’, in which he included housing and planning reform. Theresa May finally came round to acknowledging the role of free enterprise after an ill-advised attack on ‘libertarian right’ in her 2016 party conference speech. 

Boris Johnson excelled with his rhetoric in the run-up to the 2019 election, pitting Jeremy Corbyn’s calls to overhaul the market economy with his commitment to the private sector, which he noted made it possible to deliver good public services. 

But no one has crafted the policy needed to deliver this in full. When the Tories came into government in 2010, it was well understood that the economy would struggle for a while post-crash, and that difficult decisions – including spending cuts and tax hikes – were needed to get public finances in order. 

But after the surprise Conservative win in 2015 – having secured public support for rolling back the size of the state – the self-proclaimed ‘party of prosperity’ settled into the comfortable territory of growth hovering between 1.5pc and 2.5pc, failing to establish any kind of long-term plan to gain more economic momentum. 

Yes, there have been tax cuts, and beneficial ones too: cuts that prioritise putting more money back in the pockets of the working poor (the personal allowance threshold under George Osborne, the Universal Credit taper under Rishi Sunak).

But no prime minister has looked at the tax burden – which as a percentage of GDP has reached a 71-year high – and thought, this simply won’t do.

There has been no attempt to curb the slow and steady rise of the tax burden. And one of the main money-guzzlers – the NHS – remains as unreformed as ever. The principal Tory response to the rising waiting lists – now at 6.4m in England – has been to pump more money into it. 

This lack of imagination and drive to really kickstart the economy was painful enough over the last decade: the lost GDP over the years, in human terms, accounts for countless lost job opportunities, wealth accumulation and higher living standards. 

But the missed moments to implement supply side reforms are especially felt now, as Britons face a severe cost of living crunch and skyrocketing prices.

The impact of inflation is already obvious, as is the serious damage it’s causing to people’s living standards. The months that were supposed to be defined by an economic bounceback from the lockdown years are instead being defined by price hikes, feeling poorer, and – in the worst scenarios – people choosing between which essentials they’ll try to forgo. 

The economy only grew by 0.8pc in the first three months of the year, 0.1 points below the Bank of England’s official forecast only published last week, and 0.2 below the general consensus.

If that wasn't bad enough, the medium-term is projected to get worse. The Bank’s forecast for 2023 to mid-2025 suggests growth will all but stagnate. Economists are increasingly concerned that recession is around the corner, a fear reinforced by the news this week that the economy actually contracted by 0.1pc in March.

No one can be sure if, when, or how quickly recession will hit the UK: but it is painfully clear that if it does, the country is woefully underprepared for it. The biggest supply-side reforms, like planning, would take time to implement and ease cost-of-living burdens; yet we are increasingly out of time, as the first quarter's measly 0.8pc growth is the best it’s expected to get for several years now.

And the only tool the government has practiced using – spending more money – is an increasingly dangerous one. Not simply because inflation makes borrowing more money (and paying interest on it) risky, but because doing so cements the false theory that money can always be found and spent when a problem arises, without any consequence. 

It also devalues what is considered ‘big bucks’ – Sunak brought in a staggering £9bn package to help with rising energy bills this spring, and it’s nearly forgotten now, with critics and even friends calling for another big splurge.

Much of this is an inevitable consequence of the pandemic and decisions taken that were always going to have a knock-on effect on our economic future. 

But the government's failure to cut taxes and boost growth for a decade has also left us paying a terrible price. The least it could do now is start to implement the reforms it should have championed long ago.