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10 March 2017

The Conservatives’ manifesto problems won’t end here

The Tories' tax and spending pledges have left a host of hostages to fortune.

By George Eaton

David Cameron, the prime minister who revealed private conversations with the Queen, has never been renowned for his discretion. At the unveiling of the Iraq and Afghanistan war memorial, he seemingly chose to divulge his thoughts on the Budget to Defence Secretary Michael Fallon. “Breaking a manifesto promise, how stupid can you get?” the former Prime Minister appears to remark of the government’s planned National Insurance rise. Though Theresa May insisted in Brussels last night that no pledge had been breached, that’s not the view taken by most members of the ancien régime (some of whom are positively enjoying her woes).

Though Cameron went back on his word numerous times (recall the VAT rise, the NHS reorganisation, the child benefit cuts and Sure Start closures), he was careful never to make a manifesto breach as flagrant as that of the Liberal Democrats and tuition fees. “I’m not having one of those bloody split screen moments,” the former PM would say when invited to abandon a commitment such as the pensions triple lock.

When the Conservatives drew up their 2015 manifesto they did so on the assumption that they would not be forced to implement it. With few expecting to win a majority, the document was regarded as a mere negotiating tool for coalition talks. The Tories’ promise to cut taxes, not raise VAT, income tax or National Insurance (the “tax lock”), outspend Labour on the NHS and deliver a budget surplus by 2020 appeared too good to be true. 

Since Cameron’s resignation, it has been left to Theresa May to discover that it was. The Prime Minister wisely abandoned the commitment to a budget surplus immediately after entering No.10 but as the Budget showed, the Tories are still having trouble making their sums add up. Not only was the manifesto designed for a world without a Conservative majority, it was also designed for one without Brexit (Cameron having called the referendum on the assumption that he would win it).

As Philip Hammond remorsefully noted in his Budget, borrowing is £100bn higher than forecast in March 2016. Having committed to the Conservatives’ costly tax cuts, the Chancellor had to find new revenue somewhere. It was this that led to the planned NI increase (a measure George Osborne had considered but rejected on political grounds).

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Conservative ministers are sticking to the line that their “tax lock” hasn’t been breached on the grounds that the formal legislation only applied to Class 1 contributions (not Class 4). But few voters are impressed by such casuistry (though polls show that most approve of the progressive NI rise). The new measure has now been delayed until the completion of a review of self-employment benefits (as it should always have been). But the real trouble for the Tories could lie ahead.

Should the economy suffer the downturn that many regard as overdue, or worse, a new financial crisis, the tax lock could come under strain again. As a self-described fiscal conservative, Philip Hammond would be reluctant to fund public spending and tax cuts through yet more borrowing.

The government is already charged with taking a selective approach to the Conservative manifesto, having vowed to leave the EU’s single market and to open new grammar schools. This trend can only continue for so long before the document is regarded as entirely redundant. All of which explains why, though Theresa May does not want an early election, some Tories still believe she needs one.