Has Jeremy Hunt done enough to save the Tories at the next election?

The party might feel a bit better about themselves after this Budget – but creating a ‘feelgood factor’ among voters before the election will be a much harder task

Although Rishi Sunak’s ministers have made a virtue out of being “boring” after the turbulence of the Johnson and Truss periods, today’s Budget was more exciting than expected. Jeremy Hunt had done a good job of lowering expectations, enabling a fairly run-of-the-mill Budget to look more sparkly on the day than it should have done.

The chancellor began with good news: the UK will now escape recession this year, according to the Office for Budget Responsibility (OBR) fiscal watchdog – more optimistic than the Bank of England, but allowing Hunt to claim the economy is “proving the doubters wrong”. Inflation will fall from 10.7 per cent to 2.9 per cent – more good news.

But the small print was less optimistic: the UK is still forecast to have the lowest growth in the G7 this year, and the OBR has reduced its growth forecast for the final three years of the five-year planning period since last November.

Hunt's good news rabbit, which escaped early last night – more help for working parents with childcare costs – is a big and welcome intervention. “Free” 30 hours for three and four-year-olds will be extended for children at nine months. Worth £6,500 a year for a typical family, it will be phased in by 2025 and will cost £5bn a year.

The announcement signals that we are now truly into the general election run-up. The Tories will ruthlessly steal Labour’s best clothes when they need to; a childcare revolution was going to be Keir Starmer’s big election offer. He will now have to go further to trump the Tories on this crucial issue. But Hunt also filched Labour’s plan for all schools to offer “wraparound” 8am-6pm childcare provision, which the Tories will bring in by 2026.

Labour frontbenchers argued that they have been “talking about” making childcare more affordable “for some months”. But Bridget Phillipson, the shadow education secretary, has performed a dance of the seven veils without spelling out the detail of Labour’s plan, so it will be harder for the opposition to claim any credit for Hunt’s move.

Tory MPs were pleased that the childcare package was bigger than expected. One veteran former minister told me: “The childcare help will broaden our appeal to younger adults. We can’t just talk to the oldies who vote for us.”

Hunt’s other surprise was to abolish the lifetime allowance on pension contributions rather than raise it from £1.07m to £1.8m as predicted. Although it will help higher earners, Hunt could sell it as a way of persuading doctors to carry on work in the NHS rather than retire to avoid their pensions being taxed.

Hunt was right to make a start in tackling the problem of the shrinking workforce and the 7 million economically inactive 16–64-year-olds; 400,000 more than before the pandemic. The most pressing cause is a rise in long-term sickness. Ending the work capability assessment and allowing the long-term sick to keep some benefits when they start work are sensible ideas, though the transition to the new system will probably take years.

The chancellor tried to mask next month’s rise in corporation tax from 19 per cent to 25 per cent by trumpeting £9bn a year of capital allowances for firms who invest in plant and machinery. But the OBR warns there will be no long-term boost in much-needed investment.

Many Tory MPs will be disappointed that Hunt did not offer the immediate tax cuts they see as vital to finding the holy grail of higher growth. I suspect Hunt will use his next Budget in a year’s time to cut the highly visible 20p basic rate of income tax by 1p – just before next year’s general election. But ravenous Tory right-wingers, their appetite whetted by Liz Truss, wanted their red meat now. They argue that waiting for next year will make tax cuts look like “a crude pre-election bribe”. That is precisely what they will be because the Tories are unlikely to find the politically painful spending cuts needed to make real room for tax cuts.

Hunt found £6bn to freeze fuel duty – good news for motorists – but it was bad news that he failed to find a penny to help resolve the wave of public sector pay disputes and strikes. That was a missed opportunity.

Similarly, Hunt could have done more to secure growth. Too many of the obvious remedies are politically off limits – more housebuilding; more visas for overseas workers to help fill the 1.1 million vacancies and building on the Northern Ireland protocol deal by reducing trade barriers with the EU. Hunt also should have done more on “green growth”, given the huge green subsidies the US and EU are offering to firms.

The theft of Labour’s childcare plan is also a sign than Sunak is, slowly but surely, getting the Tories back in the game, after his successes on the protocol, his bromance with Emmanuel Macron and the Aukus defence pact with the US and Australia. After the turmoil under Johnson and Truss, it feels unusual for the government to be making the political weather rather than being stuck in permanent crisis management. But any government worth its salt should be doing so.

Sunak’s problem is that he will need a lot more big offers like childcare to reverse Labour’s 20-point lead before next year’s election. Tax rises already in the pipeline will intensify the squeeze, and despite the chancellor’s three-month extension of the energy price guarantee scheme, domestic bills will still be twice as high as they were a year ago. Real disposable incomes for households will fall by an estimated 5.7 per cent over the next two years.

The Tories might feel a bit better about themselves after this Budget – but creating a “feelgood factor” among voters before the election will be a much harder task.