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15 November 2022

Can the Autumn Statement cushion the Tories’ fall?

The Prime Minister is going to need more than austerity to convince voters his plans are fair.

By Freddie Hayward

There needs to be more than pure austerity in the Autumn Statement on Thursday if Rishi Sunak wants to stop the Conservatives’ electoral downfall. The tax rises and spending cuts that will be announced are in large part designed to restore the government’s economic credibility, but that doesn’t mean they will go down well with voters. On Thursday the Prime Minister and Jeremy Hunt, the Chancellor, need to convince people that the plans are fair on workers. It is suggested in the Times this morning that they will raise the minimum wage, which could help. As could raising benefits in line with inflation. Expect a sweetener of some sort.

How will Labour respond? At the moment the party will not specify policies because it is constrained by its self-imposed fiscal rules, and because it is not clear what state the public finances will be in at the next general election. The plan is to at least give voters an idea of how Labour would be different. Hence Keir Starmer is out arguing that Labour would scrap non-domiciled tax breaks, extend the windfall tax on oil and gas companies and reduce subsidies for private schools.

Liz Truss and Kwasi Kwarteng did their best to give the idea of a “growth plan” a bad reputation, but if Sunak cuts research and development spending and capital investment then Labour can reiterate its commitment to economic expansion. (A report from the think tank Onward – whose director, Will Tanner, recently became the Prime Minister’s deputy chief of staff – argues for reform to R&D tax credits rather than cuts.)

Sunak will need more than austerity beyond Thursday, too. The cost-of-living crisis is set to worsen. It may have been overshadowed in the media by the disintegration of Truss and the rise of Sunak, but people’s situations will deteriorate throughout the winter. Official data released today showed real wages fell by 2.7 per cent in the three months to September and the Bank of England has said a recession will last for the whole of next year. This is not an environment in which cuts to public services win votes. Or if, as has been suggested, the cuts are scheduled for after 2025, an environment in which a promise to cut public spending wins votes.

As today’s chart shows, Sunak’s honeymoon has stalled (even though, as Ben notes, his personal brand is relatively strong). After the Autumn Statement Sunak will need an agenda to sell to voters. The problem is that his party is unlikely to be able to decide what that should be. Even if they could, they may not have the money to fund it.

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[See also: Rishi Sunak can’t escape the Tories’ post-truth policies]