Hammond, Cable and May: the ministers who could resign over cuts

If Osborne refuses to give way in the Spending Review, cabinet ministers may choose to walk out.

When the coalition was formed in 2010, debate quickly began about who would be the first cabinet minister to resign over government policy, with the answer usually involving Vince Cable and spending cuts.

In the event, while there's been no shortage of resignations, not one has been over a point of principle. To refresh, David Laws resigned as chief secretary to the Treasury on 29 May 2010 after claiming expenses to pay rent to his partner, Liam Fox resigned as defence secretary on 14 October 2011 after  his lobbyist friend Adam Werritty was revealed to have joined him on official overseas trips, Chris Huhne resigned as energy and climate change secretary on 3 February 2012 after he was charged with perverting the course of justice by allowing Vicky Pryce to claim speeding points on his behalf, Andrew Mitchell resigned as chief whip on 19 October 2012 after allegedly calling the police "fucking plebs" and Tom Strathclyde resigned as leader of the House of Lords on 7 January 2013 to return to his business career.

But with government unity fraying over the Spending Review, it's worth asking whether we could soon see the first principled resignation. When George Osborne announced yesterday that seven departments had agreed "in principle" to cuts of up to 10 per cent, he simultaneously revealed those that had not, including Defence (Philip Hammond), the Home Office (Theresa May) and Business (Vince Cable). While Osborne now intends to revive the government's "star chamber" to coerce uncooperative ministers into accepting cuts, Hammond made it clear on the Today programme this morning that he was prepared to do battle with the Treasury: 

We should be very clear that there is a difference between efficiency savings, which may be difficult to achieve but are painless in terms of the impact on the front line, and output cuts, which are of a very different order and require proper and mature consideration across government about the impact that they will have on our military capabilities.

Should Osborne nevertheless demand more than mere "efficiency savings", it is no longer unthinkable that the hitherto loyal Hammond could walk out. After his recent interventions over welfare spending (cut it, rather than defence), the EU (he would vote to leave were a referendum held today) and gay marriage (wrong and a waste of government time), speculation has been growing among Tory MPs that Hammond could quit and set himself up as the leader of the traditionalist right. While Hammond's allies dismissed the suggestion as "ridiculous", the possibility of such a resignation increases as the election draws closer. If it looks as if the Tories will lose, the temptation for ministers to quit and position themselves for the leadership election to come could prove irresistible.

Another minister to watch, as ever, is Vince Cable, who has been lobbying hard for his department to be protected on economic grounds and has warned that "further significant cuts will do enormous damage to the things that really do matter like science, skills, innovation and universities" (he even suggested at one point that the Spending Review be abandoned) . If Osborne refuses to give way, Cable could well choose this moment to use his "nuclear option". 

Finally, there's Theresa May, who argued at the weekend that the budget of the counter-terrorism police should be fully protected, as it was in the 2010 Spending Review. She said:

I'm absolutely clear that we need to ensure that the intelligence services and, indeed, in policing CT (counter-terrorism policing)  … in the last spending review we ensured that CT policing was not treated the same as overall policing and I see every reason to take that same view in the next spending review.

Osborne said yesterday that he was "not going to do anything which is going to endanger the security of this country at home or abroad" but David Cameron's spokesman later refused to confirm that this amounted to a guarantee that the anti-terror budget would be shielded from cuts. Should this area fail to escape Osborne's axe, May, who, like Hammond, has been positioning herself for the post-Cameron era, could also choose to walk. 

Vince Cable has warned that "further significant cuts" to skills, science and universities would do "enormous damage". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Brexit is an opportunity to rethink our economic model

Our industrial strategy must lift communities out of low-wage stagnation, writes the chair of the Prime Minister's policy board. 

With the long term fallout of the great crash of 2008 becoming clearer the issue of "inclusive growth" has never been more urgent.

Eight years after the Great Crash, it is becoming clear that the long term impacts of the crisis profoundly challenges the model of economy - and politics - we have become used to. Asset inflation and technological revolutions are entrenching untold wealth for a small global elite.

This sits alongside falling relative disposable incomes for the many, and increasing difference in the disposable income of different generations. Meanwhile, a cohort of "just-about-managing" citizens are working harder than ever simply to get by, despite falling rates of savings. All of this – along with a persistent structural deficit in pensions, welfare and health budgets - combines to create an urgent need for new economic thinking about a model of growth and 21st century economic citizenship that works better for all people and places in our country.

The main political parties have set out to tackle these challenges and develop policy programmes for them. Theresa May has set out a bold new Conservative agenda of reforms to help those of our fellow citizens who are working hard but struggling to get by: to build an economy that works for everyone, and for the people and places left behind.

But this challenge is also generational, and will need thinkers from all parties - and none - to talk and think together about fresh approaches. This is why this cross-party initiative on inclusive growth is a welcome contribution to the policy debate.

The Prime Minister leads a government committed not just to deliver Brexit, but also to the fresh thinking and fresh solutions to the scale of the domestic challenges we face, which clearly contributed to the scale of the Leave vote last June. As she has said, it's clear that as well as rejecting the EU, voters were rejecting a model of growth that wasn’t working for them.

The UK’s vote to leave the European Union was one of the most dramatic and significant political events in decades – for this country and potentially for Europe. It changes everything: our economic model, our long term economic prospects, the assumptions and mechanisms through which we run most of our government and the diplomatic and economic status of the UK internationally.

Delivering a successful Brexit – one which strengthens our global security, our united kingdom, our economy and popular trust in parliamentary democracy, and a model of political economy that works to these ends, will dominate this political generation.

This is a challenge. But it is also an unprecedented opportunity to reform our model of political economy to tackle the causes of deepening domestic political disillusionment and put our country on the path to long-term recovery. 

Brexit provides us with a unique chance to address two of the most important public policy challenges facing our country.

First, the need to enable and enhance the conditions for creating and developing greater enterprise and innovation across our economy, in order to increase competitiveness and productivity. Second, the need to tackle the growing alienation of so many people and places from the opportunities of globalisation, which has in turn entrenched attitudes towards welfarism. I believe these two challenges are fundamentally linked. 

Without social mobility, and the removal of the barriers holding back national and regional participation enterprise, we will never be able to tackle the structural challenges of productivity, public service modernisation, competitiveness and innovation. 

It's becoming clearer to more and more people that a 21st century "innovation economy" both requires and drives an "opportunity society". You can't have an enterprising economy with low rates of social mobility. And the entrepreneurial spirit of economic aspiration is the fuel that powers the engine of social mobility.

For too long, we have run an economic model based on generating growing tax revenues from an ever smaller global elite, in order to pay for the welfare costs of a workforce increasingly dependent on handouts.

Whitehall has tended to treat social policy quite separately from economic policy. This siloed thinking – the Treasury and the Department for Business, Energy and Industrial Strategy for "growth" and the Department for Work and Pensions, Department of Health and Department for Education for "public services" - compounds a lack of the kind of integrated policymaking needed to tackle the socio-economic causes of low productivity. The challenges holding back the people and places we need to help do not fall neatly into Whitehall silos. 

Since 1997, successive governments have pursued a model of growth based on a booming service sector, high levels of low-cost migrant labour and housing and asset inflation. At the same time, policymakers tried to put in place framework to support long term industrial renaissance and rebalancing. The EU referendum demonstrated that this model of growth was not working for enough people. 

Our industrial strategy must be as much about lifting communities out of low-skill and low-wage stagnation as it is about driving pockets of new activity. We need Cambridge to continue to grow, but we also need to ensure that communities from Cromer to Carlisle and Caithness, which do not enjoy the benefits of being a global technology cluster, can participate too. That means new measures to spread opportunities more widely. 

The Great Crash and its aftermath - including Brexit - represents a chance for a new generation to think these problems through and tackle them. We all have a part to play. Six years ago, I set up the 2020 Conservatives Group in Parliament, as a forum for a new generation of progressive Conservative MPs, regardless of increasingly old-fashioned labels of "left" or "right", or where they stood on the Europe debate. This is a forum to discuss new ways to tackle the current problems facing our country, beyond the conventional silos of Whitehall. Drawing on previous career experiences outside of Parliament, the group also looks ahead strategically at the potential longer-term social and economic challenges that may confront us in the future.

I believe that technology, and a new zeitgeist for public sector (as well as private sector) enterprise hold the key to resolving the barriers that are currently holding back the development of new opportunities. With new approaches, better infrastructure and skills connecting opportunities with the people and places left behind, better incentives for our great innovators, and new models of mutualised public/private partnerships and ventures, we can build an economy that genuinely works for everyone.

The government has already set about making this happen. Through the industrial strategy, the £23bn package of investment in new infrastructure and innovation announced by the Chancellor, Philip Hammond, we can now be much bolder in developing a 21st century knowledge economy infrastructure that will be the foundation for economic success. 

The success of inclusive growth rests on a number of core foundations - that our economy grows, that social inequality is redressed; that people are given the skills they need to pursue a career in the new economy and that we better spread the opportunities of the global economy hitherto enjoyed by a segment of our workforce to the many. 

This can only be achieved if we recognise the way in which enterprise and opportunity are interdependent. Together, politicians from all parties have a chance to set out a new path for a Global Britain: making our country the world capital of innovation and opportunity. Not trickle-down economics, but "innovation economics" where the private and public sector commit to a programme of supporting each other for mutual benefit.

An economy that works for everyone is an economy in which the country unites around the twin pillars of opportunity and security, which are open to all. A country in which "shared values" are as important as "shareholder value". And in which both are better shared by all. A country once again with that precious alignment of economic and social purpose which is the hallmark of all great civilisations. It's a great prize.

This is an edited version of George Freeman's article for All-Party Parliamentary Group on Inclusive Growth's new "State of the Debate" report, available to download here.The APPG on Inclusive Growth's "State of the Debate" event with the OECD, World Economic Forum, RSA and IPPR is on Tuesday 21st February at 6.30pm at Parliament. See www.inclusivegrowth.co.uk for full details. 

George Freeman is the MP for Mid-Norfolk and the chair of the Prime Minister's Policy Board.