Tories need a “game changer” Budget in March to avoid electoral oblivion

The Conservative Party tanker is heading full steam for the electoral rocks – and only a “game changer” Budget in March can turn it around – says Paul Montague-Smith, senior counsel – public affairs at MRM.

Only nine months to go until the expected general election. Nine months for Rishi Sunak to turn around the Conservative Party tanker that is currently heading full steam for the electoral rocks.

With the recent YouGov poll showing the Conservatives could be annihilated – losing over half of their current 349 seats with Labour securing a 120-seat majority – it’s no wonder Conservative MPs are beginning to crack under the pressure.

In a scenario where Cabinet ministers and possible future leaders such as Jeremy Hunt and Penny Mordaunt could lose their seats, it would be only natural if they and the many MPs in a more vulnerable position were to think drastic action is needed to survive.

The former Cabinet minister Sir Simon Clarke’s call for a change of leadership is a panic bubble rising to the surface. He’s no fan of Rishi Sunak – he supported Liz Truss in the leadership election and was sacked by Sunak as levelling-up secretary – but as he represents a ‘Red Wall’ constituency he is almost certainly set to lose his seat so has nothing to lose.

Many of his colleagues may, over the coming months, conclude the same. But they know yet another ousting would be a gift to Labour. There is no clear successor and the chances of someone credible really wanting to pick up the reins right now must be low.

The Prime Minister and his election strategist Isaac Levido have a clear message for their troops – unite or die. Conservative MPs of course know that divided parties don’t win elections. But the willingness and the ability of the party to form a united, disciplined fighting force must be in serious question.

Time is fast running out and the indications are that internal party battles remain a priority. The Government’s proposal for a generational ban on smoking is the latest looming squabble. It will be opposed by anti-nanny staters on the right of the party such as Liz Truss and used by MPs and Conservative party members critical of the Prime Minister to question his leadership and priorities.

March’s Budget therefore has to be a game changer. It’s the key opportunity to give MPs a platform around which they can unite and that they can sell to voters on the doorstep.

Better tax receipts and lower debt-interest costs have given the Chancellor some more headroom for tax cuts – possible £20bn to play with. That would fund the equivalent of a 3p cut in income tax. 

Whether anything the Chancellor does in March can shift the current mood of voters is questionable, but he will need to be radical to give the Government a chance of surviving. We can expect him to push as hard as he dares without spooking the markets, maintaining wafer thin margins in terms of meeting his economic targets.

Important but tricky cans will be kicked along the road until after the election, including detailing how the public spending cuts needed to balance the books will be paid for. If the March Budget implodes on scrutiny or doesn’t provide a unifying sales prospectus for the party – barring dramatic unexpected events – it will almost certainly be game over for the Conservatives.

Coming up in February

In the policy world, the end of February sees the deadline for responses to the joint Treasury and FCA consultation on the Advice Guidance Boundary Review, which includes a proposal to fill the advice gap with a new regulatory framework enabling firms to use limited information to suggest products or courses of action to consumers.

In Westminster, the Government is due to respond to the House of Commons Treasury Committee’s reports on the cryptoasset industry and the Edinburgh Reforms by 1 and 8 February respectively. The Committee itself has recently held evidence sessions on access to cash and the implementation of the Payment System Regulator’s authorised push payment fraud reimbursement scheme, which is due to go live on 7 October 2024.

In the House of Lords, a new Financial Services Regulation Committee meets for the first time on 7 February. Chaired by The Rt Hon. the Lord Forsyth of Drumlean, the committee has been created to provide more scrutiny and accountability for regulators following their increase in powers under the post-Brexit regulatory reforms.

The Bank of England and the Treasury have recently published their response to the consultation on a digital pound that was launched last February. A key concern raised by respondents was around the implications for access to cash and privacy.

If a decision is made to go ahead, the Government has confirmed that primary legislation would guarantee users’ privacy and control. The Bank and the Government would not have access to any personal data and users could spend their digital pounds as they wish.

The current plan is to have a limit of £10,000-£20,000 per user, at least initially, with no interest paid on balances. A detailed product design phase comes next, before a final decision to go ahead is made, which is expected to be taken in 2025 at the earliest.