Hilton won't be missed by many in government, but Hiltonism will be

Cameron's chief strategist's hatred of bureaucracy could be impractical; his sense that government s

What does the departure of Steve Hilton, David Cameron's Director of Strategy, mean for Downing Street? In terms of the day-to-day running of government, the answer is not much. There is no doubting Hilton's closeness to the Prime Minister, but his direct influence on the machinery of government was not vast and has been waning for some time.

One senior government official recently told me that Hilton's presence could be felt in many ways but "on the really big, billion-pound decisions, he's not in the room."

Hilton's frustration with the practical reality of governing was famous in Whitehall. He is a fanatical enemy of bureaucracy. In a meeting he once challenged everyone present to explain why an entire government department couldn't be replaced by "seven people and a website". His attachment to digital solutions is also renowned. One mandarin satirises the Hilton response to any given policy challenge as "build me a website by Monday." The same source reveals that officials came to realise that these commands could be ignored. Hilton has a reputation for throwing tantrums and has alienated a lot of people but his ferocious attention to any particular topic is short-lived. Hide, and he'll move on. I know of at least one top cabinet office official who has considered thwarting Hilton to be a central aspect of her job description.

That said, Hilton's influence as a dynamic thinker, challenging the Number 10 operation to raise its eyes from the daily grind and contemplate the far policy horizon, has been vital. Hilton has been motivated by the impulse to leave an irreversible legacy of reform - changing the way public services are run, changing in fact the whole British conception of what the state is and what it does. The countervailing impulse has been tactical caution - driven substantially by Andrew Cooper, the No. 10 pollster and George Osborne. There is some concern - justified, I would say - that the kind of revolutionary attitude to statecraft advocated by Hilton alienates voters, especially those who were wary of the Tories in 2010. Hilton's wild-eyed zeal, often involving quite radical Thatcherite ideas, is problematic with the people Tory focus groups identify as the "considerers" - those who flirted with the idea of backing Cameron but were held back by residual suspicion that the Conservatives don't really represent ordinary people and can't be trusted, for example, to look after the NHS. (Hilton was one of those who has argued against dropping Andrew Lansley's reforms for fear that doing so would signal the death of the government's reformist energy. That was plainly the wrong call.)

The counter-argument - the defence of Hiltonism - is that without radical ideas, the government's only conspicuous purpose is deficit reduction which is (a) hurting people and (b) not working out as planned. That is making it very hard to imagine what a Conservative manifesto offer for Britain will be at the next election that might be more inspiring than a message of "more austerity, but we're getting there, give us another term and we'll nail it." Although by then, Hilton will be back - he is only taking a year's sabbatical.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR