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25 January 2017

David Cameron’s return to politics shows the limits of Theresa May’s tax haven threat

Even the austerity Prime Minister has turned anti-austerity campaigner in retirement. 

By Stephen Bush

David Cameron has made a brief re-entry into British politics as he takes up post as President of Alzheimer Research UK, and he’s urging his successor, Theresa May, to keep his promise to fully fund research into a cure.

It’s a worthy cause, but it speaks directly to an underreported headache for the government. Cameron’s premiership will be remembered for its ending, and his unwanted epitaph will be that of the Prime Minister who took Britain out of Europe by accident. But most of its life was defined by cuts to public sector spending: austerity, in other words. Now, in retirement, he’s decided that his political priority is campaigning for extra funding: anti-austerity.

It’s a more high-profile example of the same dynamic that plays out among most – not all, but most – Conservative MPs, and, indeed, among the 11 million people who voted for David Cameron in 2015. Under the coalition, austerity was concentrated not entirely but largely upon two groups. The first was Labour voters: the inner cities, specialist ethnic minority programmes, funds for the very poorest and Labour run-local authorities. The second were groups which relied on a large amount of government funding but had a small number of beneficiaries: with disabled people in particular and adult social care in general the hardest hit, along with women’s refuges, community centres and English language lessons.

But in terms of keeping their promises on the budget – and although the government has abandoned its target to balance the books it is currently committed to continuing to cut back public spending – that approach has run out of road. The difficulty with finding further savings was illustrated by the row over tax credits. When people voted for £12bn cuts to welfare, they thought it meant other people’s welfare, not their own. George Osborne attempted to push through with cuts to tax credits – and damaged his own career, very possibly forever.

Although Brexit means that the focus is not on the government’s economic policies at least for the moment, that problem – of how to marry its rhetoric with the political reality of further cuts – hasn’t gone away.

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There’s another part to all of this, too. The government’s Plan B if it doesn’t secure a good Brexit deal is to walk away, leave without a deal, and survive by becoming a tax haven, Singapore with colder weather.

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There are a couple of problems with that approach: the first is that actually, London is already a bigger financial centre than Singapore, corporation tax is the lowest in the G7. The ability to compete still further as far as that goes isn’t as great we expect. The second is that further inducements to attract large multinationals to Britain would mean a further reduction in the British tax base, which would mean a fairly unpleasant conversation with voters about the size of the public sector.

And as David Cameron shows, even Conservatives don’t really want more cuts.