Hunt and Johnson’s plans to splash cash could run into problems

pCloud Premium

Boris Johnson has a somewhat famous policy on cake: “Pro having it and pro eating it.”

But is the would-be prime minister deploying this approach when it comes to his promises on public spending?

Both contenders for Downing Street have been splurging cash on spending commitments and tax cuts.

So where is all the money coming from?

Speaking to Sky News’ Sophy Ridge On Sunday, Mr Johnson said there was “cash available” from the £22bn to £25bn of “headroom” that’s been built up.

 Victoria Sponge Cake
Image: Questions hang over whether there is enough cake to go around to pay for the cash splurges

Both he and Jeremy Hunt want to raid this perceived pot of gold to fund their promises.

But there are three potential issues with this:

More from Boris Johnson

1. The £26bn that is “available” is not a big briefcase of £50 notes knocking around the Treasury waiting to be spent.

It is there because government borrowing has come in lower than forecast. So the available money is borrowed money. If a future PM wants to spend it, he will need to pay it back – with interest.

2. The money was built up by the current chancellor as a “war chest” to spend on the economy in case of a no-deal Brexit.

If it is allocated elsewhere, it cannot be used as a contingency fund in the event a no-deal Brexit does any damage.

3. It is not a permanent solution. The fact that borrowing has come in lower than expected and there is wiggle room now does not mean there will be forever.

If the next PM wants to keep funding various areas at increased levels in the long term, he will almost certainly need to fund it through taxation or higher borrowing.

So when the £26bn war chest runs empty, where does the next PM go?

Mr Johnson told Sky News: “As the great Tunisian scholar and sage Ibn Khaldun pointed out as early as the 14th century, there are plenty of taxes that you can cut which will actually increase your revenues.”

Three minutes with Boris Johnson

Bizarre Tunisian references aside, Mr Johnson is right that cutting taxes can fire up an economy, letting businesses grow and wages rise.

This means the overall tax take flowing to the government increases, despite the percentage rates falling.

But this is a balancing act and, given current Brexit uncertainty, it’s not a guaranteed income.

A disorderly departure from the European Union could damage the economy and slash the amount of tax taken by the Treasury.

So could there be borrowing above the current planned levels?

Mr Johnson told Ridge: “If it’s borrowing to finance great infrastructure projects and there is an opportunity to borrow at low rates and do things for the long-term benefit of the country, then we should do them.”

A suggestion there that he is prepared to break with the current government mantra of squeezing borrowing and balancing the books.

:: The full transcript of Sophy Ridge’s interview with Boris Johnson

This could prove politically problematic, given the Tories have spent the best part of four years attacking Jeremy Corbyn’s Labour for its plans to borrow money to spend on infrastructure investment and public services.

But Mr Johnson goes on: “Overall, we will keep fiscal responsibility and keep going with the general trajectory of ensuring that this country pays its way and lives within its means.”

That means our possible next PM has, in one interview, committed to increasing spending on public services, implementing tax cuts and potentially triggering higher borrowing, while also saying he wants to maintain the current trend of tightening the country’s pursestrings.

All the cake in the world might not make those promises compatible.

:: Watch The Battle for Number 10: Jeremy Hunt on Sky News tomorrow at 7pm. Also watch the Liberal Democrats leadership debate between Ed Davey and Jo Swinson at 10am.

pCloud Premium

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.