The three main points from Jeremy Hunt’s speech – and what Tory conference says for stability
Let’s get the actual economic policy out of the way first. It shouldn’t take long.
There were three main bits of news from the Chancellor’s speech today.
The first is that the national living wage is likely to be raised above £11 an hour. This is, to be frank, not exactly a government decision.
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The level will be recommended by the Low Pay Commission in the coming weeks and, on the basis of wage growth recently, they’re likely to suggest an hourly rate of around £11.10 or a bit above.
All the chancellor is saying today is that he’ll approve their recommendation – which is precisely what everyone was expecting.
The second bit of news is that the chancellor wants to introduce further sanctions on those who are on benefits and show little inclination to look for work. Again, such sanctions already exist, but the chancellor wants to “look at the way the sanctions regime works”.
The third new measure is a freeze on civil service hiring, akin to the one George Osborne brought in during the austerity years when he was chancellor.
This wasn’t pre-flagged but generated the most applause of the entire speech.
By now you probably get the idea. Once upon a time, Tory Party conference was an important moment for this country’s economic policy.
It was the forum where previous chancellors – most notably George Osborne – announced new measures that would change the direction of UK PLC.
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Our deputy political editior and economics editor pick apart the significance of the chancellor’s conference speech
Those days seem to be long over: in policy terms, day one of Conservative Party conference was, to borrow American jargon, a “nothingburger”.
Of course, the real story of this conference was what was happening offstage: the Liz Truss rally and the disclosure, leaked to Sky News shortly before the chancellor’s speech, that the prime minister has indeed cancelled the Birmingham to Manchester leg of HS2.
That brings us to the wider issue here.
The slogan for the conference is “Long Term Decisions for a Brighter Future”. The government’s problem is that the more it decides to reverse long-standing government policy, whether on HS2 or on net zero, the more capricious it looks.
For most businesses trying to decide whether to invest in this country, tax rates and subsidies are only a small part of the decision-making matrix. Far more important is a sense of stability – that government will stick to its long-term decisions.
Yet that’s precisely the opposite of the impression given by the Conservative Party here in Manchester.
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Rachel Reeves has hinted that taxes are likely to be raised this autumn after a major U-turn on the government’s controversial welfare bill.
Sir Keir Starmer’s Universal Credit and Personal Independent Payment Bill passed through the House of Commons on Tuesday after multiple concessions and threats of a major rebellion.
MPs ended up voting for only one part of the plan: a cut to universal credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.
Initially aimed at saving £5.5bn, it now leaves the government with an estimated £5.5bn black hole – close to breaching Ms Reeves’s fiscal rules set out last year.
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Rachel Reeves’s fiscal dilemma
In an interview with The Guardian, the chancellor did not rule out tax rises later in the year, saying there were “costs” to watering down the welfare bill.
“I’m not going to [rule out tax rises], because it would be irresponsible for a chancellor to do that,” Ms Reeves told the outlet.
“We took the decisions last year to draw a line under unfunded commitments and economic mismanagement.
“So we’ll never have to do something like that again. But there are costs to what happened.”
Meanwhile, The Times reported that, ahead of the Commons vote on the welfare bill, Ms Reeves told cabinet ministers the decision to offer concessions would mean taxes would have to be raised.
The outlet reported that the chancellor said the tax rises would be smaller than those announced in the 2024 budget, but that she is expected to have to raise tens of billions more.
It comes after Ms Reeves said she was “totally” up to continuing as chancellor after appearing tearful at Prime Minister’s Questions.
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Why was the chancellor crying at PMQs?
Criticising Sir Keir for the U-turns on benefit reform during PMQs, Conservative leader Kemi Badenoch said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.
Sir Keir did not explicitly say that she would, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”
In her first comments after the incident, Ms Reeves said she was having a “tough day” before adding: “People saw I was upset, but that was yesterday.
“Today’s a new day and I’m just cracking on with the job.”
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Reeves is ‘totally’ up for the job
Sir Keir also told Sky News’ political editor Beth Rigby on Thursday that he “didn’t appreciate” that Ms Reeves was crying in the Commons.
“In PMQs, it is bang, bang, bang,” he said. “That’s what it was yesterday.
“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”
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