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  1. Business
  2. Economics
3 October 2018

Theresa May’s conference speech puts her at odds with her own Chancellor over spending

One way or another, May and Hammond can't emerge from the Budget with their credibility intact. 

By Stephen Bush

“You’ve just stolen my fucking budget.” That’s what Gordon Brown is reported to have shouted at Tony Blair after the latter announced in 2000 that the United Kingdom would reach the European average for health spending. Philip Hammond may feel moved to say something similar to Theresa May after her conference speech, in which she announced that austerity would “end” and that the fuel duty freeze will remain in place for a ninth successive year.

The Prime Minister usually gives crisp and lucid speeches – even though the conclusions are often an odd hybrid between bits of Ed Miliband’s manifesto and the more eccentric parts of the Mail Online’s comment section – but the disaster of last year meant that many watching seem to have been expecting a disaster. As a result, a speech that was well below May’s best is getting rave reviews.

The bit that matters – or at least could matter – are her words on austerity. From an economic perspective, the dividing line she laid out – extra Labour borrowing is bad and scary, extra Conservative borrowing is sensible and good – is not at all coherent. But if she carries it through, it moves politics away from an area where the Tories are in a mess – values – and onto one where they still hold an advantage over Labour – the perception that they are more competent. (That May will want to fight a campaign that takes as its subtext if not its text that Labour will borrow to give money to foreigners and migrants while she will borrow to help “ordinary” families, while grim, may also be politically effective.)

But will she carry it through? This speech already contained a significant expansion in the amount of borrowing the British state will countenance, with restrictions on the ability of councils to borrow to build eased. The big question is whether that will result in a radically different spending review to the one we currently expect in Hammond’s budget on 29 October. Whatever happens, it will raise tough questions either for May or for Hammond and his deputy Liz Truss. Hammond and Truss essentially the only real fiscal hawks in the Cabinet. Truss in particular is turning heads among party activists because of her pugnacious defence of fiscal discipline. Can they really stay in the Cabinet if the government follows through on May’s rhetoric? And as for May, if the government doesn’t follow through: what’s the point of her premiership?

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