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Before delving into the specifics of the plan, it’s important to clarify two points. Firstly, this is not the campaign the Conservatives are currently running. They are focusing on proposals such as compelling young people to join the army and partially reducing taxes for pensioners. Secondly, the plan is more reflective of Rishi Sunak’s vision than that of the Conservative Party as a whole. If Sunak were to win the election, it remains uncertain whether his priorities would align with or survive the broader Conservative agenda.
However, here are some of the areas Sunak would prioritize if he were to achieve an unexpected election victory.
Economic Achievements
During a visit to Belfast’s Titanic Quarter, Sunak was questioned about being the captain of a sinking ship. His response encapsulated his view of the government’s economic accomplishments. He cited the return of inflation to normal levels, real wage growth outpacing price increases, and the UK economy’s growth at the start of the year. While these are accurate statements, the government can’t take full credit for them. The resolution of supply shocks post-pandemic and the war in Ukraine has influenced these outcomes more than government policies. Additionally, while wages are growing in real terms, productivity remains stagnant. Without productivity improvements, sustained real wage growth is unattainable without triggering inflation.
Investment
Increasing investment is crucial for improving the UK economy’s performance, a point Sunak emphasized in his 2022 Mais lecture. This perspective has shaped several government policies, including the full expensing policy and the Mansion House reforms. Full expensing allows businesses to write off investment costs against qualifying equipment, a significant tax incentive aimed at boosting business investment. However, political uncertainty post-Brexit has been a major deterrent for business investment. Sunak would need to stabilize his party to encourage businesses to invest in the UK.
Artificial Intelligence
Sunak’s background in Silicon Valley and his enthusiasm for STEM subjects position him well to understand the transformative potential of AI. He has expressed a strong belief in AI’s potential, comparing it to the Industrial Revolution, the advent of electricity, and the birth of the internet. Sunak advocates for a regulatory approach that encourages innovation while recognizing AI’s potential risks. The government plans to invest £100 million in AI research hubs and double funding for the Alan Turing Institute. However, AI’s potential to boost growth and productivity comes with the risk of significant job losses, a contentious issue that Sunak has not heavily emphasized in his campaign.
Labour Force Participation
The UK’s workforce has not returned to pre-pandemic levels, primarily due to increased long-term sickness. Enhancing labour force participation is essential for economic growth and reducing welfare costs. In 2023, Jeremy Hunt introduced measures to improve participation, such as expanding childcare provision and implementing a £2.5 billion initiative to boost mental health services and cut benefits. Despite these efforts, the Conservative Party faces criticism as the rise in long-term sickness has occurred under their prolonged rule.
Tax Cuts
The Conservatives’ recent fiscal policies have included two 2p cuts to National Insurance, with further pledges to abolish it entirely when feasible. These tax cuts aim to attract voters and are based on the belief that lower taxes correlate with higher growth, as observed in North American and Asian economies. However, the feasibility of further tax cuts is questionable given the fiscal constraints. The Institute for Fiscal Studies (IFS) predicts that the next government will inherit a challenging fiscal situation, comparable to the 1950s. Hunt’s current plans are already based on tight post-election spending projections, making additional tax cuts likely contingent on further government spending reductions.
In conclusion, while Sunak has outlined an ambitious plan focusing on economic stability, investment, AI, labour force participation, and tax cuts, the practical implementation of these priorities would face significant challenges within the broader Conservative Party and the existing fiscal constraints.
