Conservative splits on austerity are a political gift for Labour

Tories are identifying the problems with austerity but their party is not providing the solutions. 

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For nearly a decade the Conservatives have cited the UK’s budget deficit as justification for austerity. But the recent improvement in the public finances (Britain has eliminated its current deficit) has led some to declare victory. “We got there in the end - a remarkable national effort. Thank you,” tweeted austerity’s author, George Osborne. 

This outcome, as Stephen noted last week, has been achieved at no small cost. Homelessness has risen by 169 per cent, the NHS is buckling under the strain of rising demand and child poverty has reached its highest level since 2010.

Over the same period, Britain has voted to leave the EU (in part due to discontent with austerity) and, to Tory dismay, a left-wing Labour Party has eliminated its parliamentary majority. If Osborne believes this is success, what would failure look like?

But the achievement of a current budget surplus (following a deficit of £100bn in 2010) remains a significant landmark (no government has run a current surplus since 2001/02). The Conservatives, however, are divided on how to respond.

For some, this is the moment to finally end austerity. Tory MPs, such as Nick Boles, Heidi Allen, Johnny Mercer and Sarah Wollaston, recognise that public spending cuts contributed to their election failure. Some believe, as Theresa May’s former aide Nick Timothy argues in his Telegraph column today, that the government should abandon the target of an overall budget surplus in order to invest in infrastructure and raise spending on the NHS (an electoral priority) and defence (a Tory priority).

“The government has achieved its surplus,” Timothy writes. “It can invest in the economy for the long term. It can start to increase spending on public services. It can show that the Conservatives are more than just cutters: they have a broader and more ambitious economic mission and a deep sense of social justice. Mr Hammond must declare an end to the Age of Austerity.”

Yet others, including, crucially, Philip Hammond, believe this is no time “to go soft”. They warn that the UK’s national debt remains dangerously high at £1.7trn or 84.1 per cent of GDP, and point to the pressures that Brexit, mediocre growth and an ageing population impose. 

Theresa May has long been sceptical of Hammond’s fiscal conservatism but missed her chance to move the Chancellor when she blew her majority in a needless election (Hammond has since been strengthened by the non-implosion of his Budget).

For Labour, this divide is a political blessing. An increasing number of Tories articulate the problems with austerity but their party is unable to provide the solutions. By contrast, through divided in other areas, Labour is united in its desire to end spending cuts.

The Conservatives' historic strength has been their adaptability. Depending on circumstance, they have been Europhile and Eurosceptic, statist and laissez-faire, isolationist and interventionist. If the Tories are to retain power, yet another metamorphosis may be needed: from austerity to stimulus. Should they prove incapable of change, the voters may well conclude that they are unworthy of power. 

George Eaton is political editor of the New Statesman.