‘Magic money tree’: do Hunt and Johnson’s policies add up?
Chancellor Philip Hammond warns Tory leadership hopefuls to ‘stop and think’ before making more spending pledges
Philip Hammond is urging the two remaining Conservative leadership contenders to “be honest” about their spending promises in their battle to succeed Theresa May as prime minister.
As the BBC reports, both Boris Johnson and Jeremy Hunt have “announced a raft of policies during the contest, including cutting taxes and increasing spending on public services”.
But the chancellor has told the broadcaster that the pair need to “stop and think”, as their policies “greatly exceed” what Treasury can afford to fund.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
“Whether it is a leadership competition or a general election, there is always a temptation to get into a bidding war about spending more and cutting taxes,” said Hammond, who has not endorsed either candidate.
“But you can’t do both and, if we’re not careful, all we end up doing is borrowing more, spending more on interest instead of on our schools and our hospitals and our police, and delivering a bigger burden of debt to our children and our grandchildren.”
Hammond later warned that more money would be needed to support the economy if Britain leaves the EU without a withdrawal agreement.
“The ‘fiscal firepower’ we have built up in case of a no-deal Brexit will only be available for extra spending if we leave with an orderly transition,” he tweeted. “If not it will all be needed to plug the hole a no-deal Brexit will make in the public finances.”
So what are Johnson and Hunt’s funding pledges - and is the chancellor right?
Johnson’s plans
Johnson, who remains front runner to become PM, has so far pledged to spend a total of around £25bn of the “fiscal headroom” built up by Hammond.
The would-be PM’s spending plans include raising the thresholds for both higher-rate income tax and National Insurance contributions, bringing school spending up to £5,000 per pupil, funding the training of a further 20,000 police officers, and increasing public sector pay.
Asked how he would pay for his plans, Johnson told reporters that “the money is there ... We also think there is room to make some sensible tax cuts as well, and we will be doing that, too”.
Hunt’s plans
Despite Johnson’s reputation for fanciful hyperbole, Hunt has pledged to spend more than his rival, racking up a total of £29bn worth of promises since starting his campaign.
The Times reports that the foreign secretary’s pledges include reducing corporation tax, raising the National Insurance contributions threshold, reducing interest on student loans, increasing defence spending to 2.5% of GDP, and supporting farmers and fishermen in the event of a no-deal Brexit.
Can the UK afford them?
Both candidates say they will fund their spending from the £26.6bn Brexit war chest set aside by Hammond.
However, concerns are already being raised over the legitimacy of that quoted sum. The Institute for Fiscal Studies (IFS) estimates that an incoming PM could probably spend only about £15bn extra per year while still gradually reducing government debt, The Times reports.
The proposals for higher spending and lower taxes would “amplify the long-run challenges facing the UK public finances”, the IFS warns.
Many commentators are more scathing, with anti-Brexit organisation InFacts.org claiming that “the Tory party’s magic money tree is growing out of control”.
“The money needed for any new prime minister’s spending plans will be swallowed up by a Brexit black hole,” the group’s website says. “We will have less money, not more.”
All the same, it is “not politically surprising” that both Hunt and Johnson “want to signal they would turn on the spending taps a bit after a long, long period of cuts”, says BBC political editor Laura Kuenssberg.
Yet as Former Treasury permanent secretary Lord Macpherson has noted, some of their pledges make shadow chancellor John McDonnell look like “a model of fiscal rectitude,” says The Times.
“And this is from the party that has spent the last four years accusing Jeremy Corbyn of making unfunded spending commitments,” the newspaper adds.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Why au pairs might become a thing of the past
Under The Radar Brexit and wage ruling are threatening the 'mutually beneficial arrangement'
By Chas Newkey-Burden, The Week UK Published
-
'A direct, protracted war with Israel is not something Iran is equipped to fight'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Today's political cartoons - April 17, 2024
Cartoons Wednesday's cartoons - political anxiety, jury sorting hat, and more
By The Week US Published
-
Is David Cameron overshadowing Rishi Sunak?
Talking Point Current PM faces 'thorny dilemma' as predecessor enjoys return to world stage
By The Week UK Published
-
Will Aukus pact survive a second Trump presidency?
Today's Big Question US, UK and Australia seek to expand 'game-changer' defence partnership ahead of Republican's possible return to White House
By Sorcha Bradley, The Week UK Published
-
Can Boris Johnson save Rishi Sunak?
Today's Big Question Former PM could 'make the difference' between losing the next election and annihilation
By The Week UK Published
-
It's the economy, Sunak: has 'Rishession' halted Tory fightback?
Today's Big Question PM's pledge to deliver economic growth is 'in tatters' as stagnation and falling living standards threaten Tory election wipeout
By Harriet Marsden, The Week UK Published
-
Why your local council may be going bust
The Explainer Across England, local councils are suffering from grave financial problems
By The Week UK Published
-
Rishi Sunak and the right-wing press: heading for divorce?
Talking Point The Telegraph launches 'assault' on PM just as many Tory MPs are contemplating losing their seats
By Keumars Afifi-Sabet, The Week UK Published
-
Fiscal headroom: can the UK afford more tax cuts?
Today's Big Question Lower borrowing costs could give the Chancellor more room for manoeuvre in upcoming Budget
By Sorcha Bradley, The Week UK Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published