It’s never reassuring when economic policy is chosen for alliterative reasons.
In a speech at Bloomberg’s HQ today Jeremy Hunt, the Chancellor, said his economic plan could be summed up in four Es: enterprise, education, employment and everywhere. There wasn’t much new in the speech. He said that any actual policies would be announced in the Budget in March, admitting that the speech was “a plan for growth”, not a “series of measures or announcements”. His four Es were a rehash of Rishi Sunak‘s Febraury 2022 Mais lecture – his signature speech on economic policy – which said the government, of which Sunak was chancellor at the time, would focus on capital, people and ideas.
Without much to announce, Hunt struck an optimistic tone about the potential of the British economy. He pointed to reforms to the Solvency II insurance regulations that will allow large reserves held by insurers to be invested in the economy. He said reducing inflation – 10.5 per cent currently – was still the priority for the government, despite some criticism of the Treasury for focusing on this when it’s the primary job of the Bank of England.
There were two key political backdrops for the Chancellor’s speech. First, the brewing disagreement between the EU and US over Joe Biden’s Inflation Reduction Act, which provides billions of dollars of tax credits to households and businesses to encourage the green transition. The EU says the policy contradicts the rules of the World Trade Organisation and is preparing its own response. The risk for UK green industries is that they get squeezed between these two economic giants. Hunt did not say how the UK would react.
Second, calls for tax cuts from Conservative backbenchers are growing louder. Hunt didn’t provide any hint that he would give in to their demands. Instead he said that “the best tax cut right now is a cut in inflation”.
The lack of substantive policy in the speech is partly explained by the government’s weakness in parliament. Hunt didn’t make any announcements on planning reform, for instance, smarting perhaps from a successful rebellion on housing targets in November. The challenge for him now is building consensus within the party in time for any policies he might, maybe, announce in the spring.
[See also: Is Jeremy Hunt the Tory saviour?]