Tory MPs are desperately hoping that a surprise spring economic revival will allow Jeremy Hunt to alter his tax-raising plans, amid warnings that the chancellor’s “stealth tax” autumn statement will extinguish the party’s election hopes.
While concerns have already been raised on the right of the party over the extent of the £25bn in tax rises announced by the chancellor last week, figures from across the party said that “emotional and mental exhaustion” had blunted a greater immediate backlash.
However, senior Tories were warning that Hunt would face serious pressure to rethink some of his tax increases on middle earners in his spring budget. Some blamed “unduly pessimistic” forecasts from the Office for Budget Responsibility (OBR) for Hunt’s grim statement. Others are simply hoping inflation will fall faster than expected in the spring, allowing Hunt to reshape his plans.
“Tory MPs are giving new management a chance but I think the spring budget needs to be more positive,” said one influential MP. “Inflation is expected to peak soon so it could all look better.” Another said: “The OBR have been unduly pessimistic. They could be right, but there’s room for it to come out to the upside, in which case room for manoeuvre opens up. I’m convinced inflation will drop more significantly next year than people think.”
This comes as a new Opinium poll for the Observer reveals that Labour retains a narrow lead on the economy. While 31% think a Labour government led by Keir Starmer would be best at handling the economy, 30% opt for a Conservative government led by Rishi Sunak.
Almost half (49%) describe their current financial situation as “coping”. Only 25% say they are comfortable, while 25% say they are struggling. Overall, Labour maintains a clear lead of 17 points over the Tories in the poll, which was taken immediately after the autumn statement.
Hunt’s package included spending cuts and tax rises amounting to £55bn, with the tax burden rising to a post-war record of 37% of GDP. Privately, Tory MPs are raising concerns about “stealth taxes” that drag people into paying higher rates of tax, more people paying inheritance tax, a cut to tax-free earnings from dividends and a reduction in capital gains tax allowances. Others are worried about a real-terms cut to investment, particularly in red wall areas.
Many share those concerns, but a mixture of relief, exhaustion and an uneasy truce between party factions has muted public criticism. “It’s emotional, mental exhaustion on behalf of a lot of colleagues,” said one veteran MP. “It just is what it is now. We’ve exhausted all other options. Prime ministers have come – we’ve got rid of them. We’ve got rid of them in 44 days. We’ve had rebellions on this, rebellions on that. We’ve actually just kind of run out of money. We’ve a frontbench that has gravitas and that makes the pill easier to swallow. There was a general sense of relief from the Conservative benches that at least it was done competently.”
Another said: “Given the circumstances, Hunt was pretty damn good. I do feel right now that in my party there is a bit of a truce going on. How long it lasts, we’ll wait and see. We’re almost relieved to have grown-ups making decisions, even if we don’t like those decisions.”
However, the truce is uneasy. One ally of the chancellor hit back: “Nutty tax-cutters won’t cut inflation.” Some on the right are speaking out over the tax burden. MPs Esther McVey, Richard Drax and John Redwood have already raised concerns.
David Jones, the former cabinet minister, told the Observer: “I’m concerned about what’s proposed. There is nothing in that statement for growth. If we don’t encourage growth, we’re effectively consigning people to paying higher taxes indefinitely.
“The turn of phrase that was employed before the statement was that those with the broader shoulders will bear most of the burden. It strikes me that those who are going to be bearing most of the burden are going to be the middle-income earners. It is the squeezed middle again.”
Another imminent clash is coming over fuel duty. It is expected to rise by 23% this year unless Hunt takes action to hold it down, but that would require additional spending that he can scarcely afford. Former home secretary Priti Patel is understood to be among those pushing for a freeze until the next election.
Others are even more pessimistic about the party’s plans – with one former minister raising doubts over Sunak’s future as leader if Labour continues to lead by more than 20 points in the polls.
“The country is run by two losers,” they said. “Hunt lost to Boris and Rishi to Liz: no wonder we are in trouble. This pair could not even win the membership votes. Both millionaires who don’t understand ordinary people – so God help us when we have to face the people at an election. If he is not making progress, he will be gone after the locals and we will try again. The party won’t accept 20-point poll leads for Labour. He has to have it to below 10 by the local [elections].”