Analysis by Incisive Health

Until today, the last proper fiscal event was the Budget in March 2020. That was in the foothills of the pandemic, at a point when the eyes of Number 10 were firmly fixed – too fixed, it transpired – on the post-Brexit, levelling-up agenda. In one of those wonderful coincidences, 11 March was probably the day when it finally dawned on ministers that they were going to have a problem, here, but also when they realised it was far too late to rewrite the Budget in a panic. The pre-prepared numbers were duly presented, entirely fictitious though they were.

The numbers in today’s Spending Review may be less fictitious – the Government now knows what it’s dealing with – but it cannot remotely be considered a ‘proper’ fiscal event either. The taps feeding the money hose are still fully on, gushing out borrowed money. The numbers behind the Spending Review are less about who is losing out but who is missing out.

If we can discern anything from today, what is it? Well, the NHS continues to be supported, but not supported enough for Simon Stevens to conclude that the conversations with the Treasury can conclude quite yet. There is further investment in public sector services, albeit not in public sector pay. The Government is committed to the levelling-up agenda, provided that it doesn’t cost a lot of money. That fully-prepared social care plan which Boris Johnson promised us when he became Prime Minister again surprises us, or not, with its absence. The ‘economic emergency has only just begun’, but thankfully it isn’t serious enough to impede the delivery of ‘once in a generation investment’.

In short, it is a wealth of contradictions – and unsurprisingly so. At the heart of them are, as always at these times, the institutions of the Treasury and Number 10. An institution which wants – needs – to try to get the books to vaguely balance, and an institution which like the electorate refuses to cut public spending and like the Conservative Party refuses to increase taxes.

Left to its own devices, the Treasury may accept that further, non-recurrent spending is required right now – but they will want to turn their numbers black, or at least less red, when the next Budget in March comes around.

But Number 10 will not. Next March is barely a month out from some pretty critical elections, and is no time for tax increases. It is actually no time for tax increases at all in 2022 or 2023, or indeed at any point up until the next general election. Ditto for spending cuts. Governments, least of all governments elected on a platform of not raising taxes and increasing public spending, do neither in the run-up to general elections. The dirty work is for their immediate aftermath.

The raw politics of this are fascinating, at least if you like that sort of thing. The basis of the Conservatives’ offer to the electorate has for decades been that, when push comes to shove, they’re the ones that spend less money and – although more miserly – are able to go easier on people as a result. But the offer of a fiscally incontinent Conservative Party is surely something that voters will scratch their heads about.

This may well not be a problem for the Conservatives, unless Labour – under new management – wants to outflank them. But do they want to, and can they? Keir Starmer has been making interesting noises about the Government’s wasteful spending for some time now, and may be trying to find a theme. He has an entire wing of his party to face down before the electorate will listen – and no opposition should ever propose either to raise taxes or cut spending – but is he trying to become the face of fiscal responsibility?

We shall see. At the moment, we are still in our Alice-in-Wonderland world of public finances, and will be for some months to come. But when we come back through the looking glass, and can look forward to a proper fiscal event once again, we may find that although the world is looking a little bit more normal, politics has been turned on its head.