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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The Conservative party’s biggest problem, at the start of a year in which the prime minister must call a general election, is one of maladaptation. Or, at least, that’s the biggest problem the party can itself control: it can’t do anything about the global shocks that have hit the nation since the last election, or its own decision to inflict the Liz Truss experiment on the country.
Historically, the Tory party’s great strength has been changing to win: its most recent reinventions have seen it become first a party of Brexit voters and then one configured around the preferences of voters who have been winners from the era of ultra-low interest rates. Whatever label various rightwing thinkers have given these groups — the “overlooked but decisive”, the “just about managing” — what has united the new Conservative electoral coalition is that it is a product of cheap credit. The party’s ability to shift with the times is, for the moment, broken.
It is true that many of the choices that a succession of Tory politicians have made — from lockdown-breaking parties in Downing Street to the economy-breaking budget of Kwasi Kwarteng — have been less than helpful to Conservative electoral interests. But even if the party had been well led since 2019, it would almost certainly find its winning coalition of voters unravelling as interest rates look set to return to something resembling historic norms.
But the Tory party’s biggest maladaptive trait is not that it has made itself the party of low interest rates as the near-zero rate era comes to an end. Rather it is that it has made itself the party of voters that most of its power brokers don’t really like, and consequently saddled itself with promises it would rather not keep.
Take the news that Rishi Sunak met with Dominic Cummings shortly after becoming prime minister. This master tactician sat down, thought very deeply and then suggested that what Sunak really needed to do to was to raise the higher rate threshold from £50,271 to £100,000 and to make it his first priority to end the NHS strikes. In other words, the path to Conservative recovery lay through delivering the Truss “mini”-Budget a second time, while making it even more explicit that, in addition to taxing less, Sunak planned to spend more.
Cummings is persona non grata among most Conservative MPs and the revelation that Sunak met with him has managed to unite large numbers of them in anger; the former adviser to Boris Johnson is an open critic of most of the party’s politicians. But the two are closer than they like to think, at least in terms of this shared affliction: making mutually exclusive pledges on tax and spend.
It’s true to say that Whitehall could be run better, and at least arguable that the upward drift of many taxpayers into the higher rate — one in eight nurses and a quarter of teachers are set to pay it by 2027-28 — has created a number of perverse incentives in the UK tax system. Reform of both might well increase tax receipts and improve how the country’s public services operate.
But it is pure fantasy to think that you can hand 10 per cent of people a tax cut and simultaneously spend what is necessary to bring the NHS strikes to a swift close. And that’s before you address the various other expensive crises in the public realm, from policing to short jail sentences, that Cummings has complained about since his enforced transition from Downing Street to Substack.
In the abstract, there is no question that pledging to tax less and spend more is popular. Indeed, Johnson’s 2019 manifesto, which committed the government to more money for the NHS, schools and the police while keeping the major taxes flat or falling, was itself based on this same impossible promise.
Sunak tried to square this circle during his time as chancellor by breaking the government’s promises on tax, and was rejected by Tory members for his pains. Truss tried to square the circle by cutting tax and doing nothing on spending, and was rejected by the markets as a result. Cummings has yet to make clear what would have ensured a better reception for his proposed emergency Budget than the one Kwarteng actually delivered. Given he couldn’t persuade Sunak on this, he remains irrelevant but symptomatic of a wider problem in the Tory family.
Because Cummings is far from alone in having apparently slept through Truss’s 49-day premiership. Take any Conservative critic of Sunak and his tax rises and you are bound to find demands for more money for their pet projects, whether they be ideological hobby horses or largesse for their own constituencies. Nor is the prime minister himself immune from this disease: on the one hand, he brags about his recent tax cuts, on the other he commits to teaching all pupils in England maths to age 18. The extra teachers, presumably, will be paid for out of good wishes.
The Conservative party — a machine built around winning — has become a party that makes promises it does not like, to voters it does not really want. As a result, it can neither tax more nor spend less. Its biggest achievement is that it can still sufficiently cow the Labour party so that they, too, may find themselves saddled with a similar set of impossible promises if, as seems highly likely, they take office around the back end of this year.