Ten years later, the Sunak government is still committed to the austerity narrative

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Monday, November 21, 2022 6:30 a.m

Through:

Eliot Wilson

Eliot Wilson is a co-founder of Pivot Point and a former House of Commons official.

Rishi Sunak has previously acknowledged the role that austerity measures play in supporting public finances. (Photo by Leon Neal/Getty Images)

As you read this, you may be thinking that every analysis of last week’s Fall Statement has been completed and there is nothing more to say. In general, you’re right, and I certainly have no intention of overlooking the financial details or examining her guts for any signs of future events.

From a presentation perspective, Jeremy Hunt delivered a confident and assured performance and sounded like a Chancellor of the Exchequer at the highest level, which of course is precisely why he was called off from the backbenches after Liz Truss ruled that Kwasi Kwarteng was the next burn victim , to try and save her doomed Prime Minister’s office.

One aspect of the Chancellor’s statement was particularly striking. The new economic and fiscal policies were very deliberately framed as part of a Tory continuum, a set of measures demonstrating long-term skilful stewardship of the ships of state. At one point, Hunt remarked:

“We learned from the success of Nigel Lawson’s Big Bang in 1986 that smart regulatory reform can attract investment from around the world, so today, using our Brexit freedoms, I affirm the next steps in our supply-side transformation.”

This is an interesting piece of phraseology because not only does it refer to the Big Bang (which would be ancient history to many listeners), but it also doesn’t shy away from describing “supply-side” economics, despite the controversy held by that phrase after Kwarteng’s difficult statement from September fixed.

Hunt returned to Big Bang when announcing the government’s reforms to Solvency II insurance measures. “Nigel Lawson’s Big Bang inspires us today, but nearly 40 years later we must remain true to his mission to make Britain the most innovative and competitive global financial center in the world.” Perhaps with these references to the great banking revolution of the 1980s, the Chancellor wanted the conservative right of his true Thatcher instincts.

However, this was not just a tribute act to Margaret Thatcher, but rather a Conservative Greatest Hits. Hunt also paid tribute to the work of David Cameron and George Osborne in acknowledging the coalition government’s austerity measures.

“Strong public finances don’t just make accountants happy. Because we made tough decisions in 2010, we were able to afford record increases in funding for the NHS, the landmark furlough scheme and now the Energy Price Guarantee.”

This is an unusually rich historical context for a financial statement. As long as there have been economists, there has been debate as to whether the Big Bang and austerity measures were overall beneficial. The former certainly restored the city’s competitive edge through deregulation, but opened up the sector to financial giants. Even Lord Lawson has written of “the reforms triumphantly reaching their goal, though not without setbacks along the way”.

As for the austerity measures, the structural deficit should be eliminated and the public debt-to-GDP ratio should be reduced. It was accepted by the public as necessary under the coalition, but its effects are now more difficult to assess positively. Hunt’s praise for this particular branch of conservative politics is not alone. During the pandemic, we heard Rishi Sunak hint at his admiration for the austerity years, reminding us that programs like furloughs were only possible because of the “financial discipline” of previous chancellors.

More than usual, Hunt’s fall statement was about reassurance. We were reminded in September of the importance of market perception and Hunt was tasked with calming and reassuring. Paul Johnson, Director of the Institute for Fiscal Studies, described the purpose of the statement as “restoring the UK’s battered international reputation”. The Guardian noted that “one of the key audiences Hunt has to cater to is the money markets”.

So this can be an example of carefully calibrated usage. Hunt isn’t really speaking to the electorate, and of course not to the opposition either, but to the really important audience, international financial opinion. It’s all under control, he says. I’m in charge, I’m an adult and I’m thinking long-term. I know that austerity measures have hurt, but they have also at least strengthened us financially for the pandemic. The Chancellor is Anglican but he has looked to the pre-Reformation era and Julian of Norwich as a guide: all will be well, and all will be well, and all kinds of things will be well.

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