Dropping a central policy from the budget is not great for the public finances, but it isn’t the money that is going to hurt the chancellor. Not at first. It is true that abandoning plans to raise national insurance contributions (NICs) for some self-employed workers means the numbers no longer add up, so Philip Hammond has an arithmetical problem on his hands, which will become a revenue-raising problem. And it is the ever-increasing difficulty in finding ways to take money from people without whipping up a political storm that has landed the government in this mess in the first place. For all that, the problem extends beyond the finances.
It’s not even the fact of a U-turn. A U-turn in politics is never elegant – the epithet “humiliating” is so routinely attached it has become hard to imagine any other kind. But when trouble is brewing and rebellion threatens to destabilise the government on other fronts, a swift humiliation can be preferable to a protracted one. The rule, as many a Downing Street spin doctor has learned when defeat looks certain, is to concede quickly and move on. In this case, No 10 does not have the will to fight Tory backbenchers on a matter of fiscal policy; not when only a fortnight remains before the self-imposed deadline for triggering article 50 and embarking on Brexit proper; not when Nicola Sturgeon has tossed a Scottish referendum caber into the works. Theresa May wants a relatively clear desk, and tax rises that breach a manifesto commitment are messy. Hence the emergency manoeuvre. And if May can make this Hammond’s humiliation, rather than her own, she might limit the damage to her brand as the straight-talking, no nonsense prime minister who will deliver Brexit.
The gravest error being committed here is the pretence that the breach is somehow not as bad as it looks. Anyone who doubts the capacity of that miscalculation to ruin political reputations should ask Nick Clegg about his experience with tuition fees. Instead of resorting to textual casuistry to explain how the letter of the manifesto was unviolated, the government could have fronted up the revision and justified it with drastic changes in national circumstances. Brexit clears the decks. Then some blame might discreetly have been diverted on to David Cameron and George Osborne for making a short-sighted un-keepable promise in the first place.
There was not much to fear from the opposition. But Downing Street did feel it had something to fear from Fleet Street
The experts who welcomed the NICs reform liked it not because of the money it raises in the short term but because of the precedent it sets for extending the overall spectrum of government revenue sources. It broadened the tax base. There is really no doubt that something has to be done in this area as a matter of urgency over the next decade. But this assertion of a veto by Tory rebels on even a modest reform delays the moment of fiscal honesty still further. It signals that the prime minister is not ready to engage with the fundamental arithmetic of running public services in austere times. It testifies to a level of dogmatism and immaturity in the Conservative party’s approach to the politics of taxation, nurtured and cosseted in delusion by fanatical cheerleaders in the press.
That is the key to understanding what has happened in the past seven days. There was not a ferocious public outcry in response to the NICs rise. But there was outrage across the front pages of newspapers that have generally been supportive of May. There was not much to fear from the official opposition. But Downing Street did feel it had something to fear from Fleet Street. This quick capitulation will be noted by Tory MPs: by those who wasted their breath defending a policy, only to see it jettisoned, and those on the right who have a taste for rebellion. A lesson the prime minister may have learned from her two decades in parliament is that there is no concession to satisfy that insurrectionary appetite. The hard right of the Conservative party and its media cheerleaders give credit to Tory leaders like payday loan sharks – in small amounts and at exorbitant interest rates. The main cost of May’s U-turn is not financial. It is that she has put her governing authority even deeper in hock to forces that will make her pay many times over in the coming years.