Hunt talks up post-Brexit Britain as he sets scene for Budget

Good morning. Jeremy Hunt has a big speech today. Some thoughts on that in today’s note.

Jeremy Hunt will speak to tech investors today about growth. Well, the text of the speech is about growth. The subtext of his speech is about laying the groundwork for his Budget announcement on March 15. Part of that involves drawing people’s attention back to the measures in his autumn statement that were designed to increase growth — something which Hunt admits few people noticed at the time.

Another element will be about standing firmly against calls for tax cuts from the Tory party’s right flank. At the same time, the chancellor will give a nod to his Conservative critics by railing against a “declinist narrative” and talking up Brexit opportunities (to be accessed by rewriting regulation).

Hunt has to do this. He asked his party to swallow a lot of heresies in his autumn statement and will be asking them to swallow more in March. He faces a parliamentary party that loves to call for both tax cuts and spending increases, sometimes in the same breath.

It doesn’t help him internally that he has recruited Blairites and Blair-era advisers to lead his policy reviews. Although that tactic produced policy and political successes under David Cameron, the Conservative party more broadly has soured on it. One influential Conservative recently told me that David Cameron’s habit of appointing Blairites and Liberal Democrats to key posts was an example of how he and George Osborne “didn’t understand power”. More and more, the view of these things is the one expressed in this piece for The Critic: that a Conservative government should appoint Conservatives. Nor does it help Hunt that the warmest reviews for the measures in his autumn statement came from wet centrists.

So a little bit of light Brexit boosting is, Hunt hopes, the spoonful of sugar that will make his internal critics take their medicine again in March. The problem is that while there is a gold-plated political case for talking up Brexit opportunities, Britain’s departure from the bloc remains one of the biggest drags on UK economic performance according to many economists (do check out the FT’s viral film for a sharp interrogation of Brexit’s effects on UK business and economy). Brexit has also exposed many of the industries targeted for growth in Britain to new threats.

Take car production. As Peter Campbell reports, UK car production has fallen to its lowest level since 1956. Now, some of that is about supply chain issues and some of that is about production lines that are switching to electric vehicles and have therefore reduced their output today in order to increase it tomorrow. (All the details on this are covered off nicely in Peter’s story.)

Added to that, the whole of Europe faces a US that is seeking to tempt more green industry and jobs to the US with the subsidies contained in Joe Biden’s $369bn Inflation Reduction Act. So the UK will soon face, not only Biden’s IRA, but whatever measures the EU ends up adopting to try and ensure it is not left behind. Brussels last week pledged to make “unprecedented” investments in clean technologies in an effort to counter the US stimulus package.

You can regulate better or differently, but that doesn’t help you if you face a global political backdrop that encourages jobs and industries to move. In September 2019, Guy Verhofstadt, the then Brexit co-ordinator for the EU Parliament, equated the EU to “an empire”, arguing the “British can only defend [their] interests and way of life by doing it together in a European framework.”

While you can reasonably criticise Verhofstadt’s political judgment in making the comment so soon before the 2019 election, his diagnosis of the policy challenges facing the UK and Europe has been strengthened, not weakened, since then. Great power conflict between the US and China has increased and it has become an area of bipartisan consensus in Washington.

All of that context does have implications for the UK’s growth potential. Just because Jeremy Hunt can’t mention it for fear of what his party will do to him, and just because Keir Starmer can’t talk about it for fear of what the voters might do to him, doesn’t make it any less true.

Now try this

I saw the Orchestra of the Age of Enlightenment play a series of works by Camille Saint-Saëns at the Royal Festival Hall last night. You can see their 2023 performance listings here. As it happens, the RFH was the first gig I went to as pandemic restrictions were easing: it was still largely empty and of course we were still all required to wear masks. (Which, for me at least, meant watching everything through steamed-up glasses half the time.) It was a pleasure to be back properly, in a full concert hall.

And it was a brilliant set of pieces. The real highlight for me was Steven Isserlis’s performance of The Swan in tribute to cellist Jacqueline du Pré, who would have been 78 yesterday. You can listen to du Pré’s take on The Swan here.

However you spend it, have a wonderful weekend!

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