Will Kwarteng’s welfare move pay off for the Tories?

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Good morning. One of the UK’s many problems is our very tight labour market — which is one of the things that the Bank of England’s Monetary Policy Committee will have to consider today.

Chancellor Kwasi Kwarteng has a solution of his own, and I discuss its political and policy effectiveness in today’s note.

Inside Politics is edited by Georgina Quach. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to [email protected].

Can’t UC? This scheme won’t work

Could Trussonomics prove to be politically potent even if it turns out to be economically shaky? Robert Shrimsley considers that question in his column today:

Scepticism is well justified but, given their electoral record, it is at least worth considering the possibility that they know their audience.

It’s a good reminder that the best performing heuristic in UK politics, from a predictive perspective, is “never bet against the Tories”. While there are important and big differences between the era of Truss and the Conservative governments preceding it, some of the electoral hits haven’t changed.

As George Parker reports, Kwasi Kwarteng will use his mini-Budget tomorrow to unveil measures to pressure workers on universal credit to increase their hours or face having their benefits cut:

Kwarteng will announce changes to universal credit that will require benefit claimants working up to 15 hours a week at the national living wage to meet a work coach regularly and take active steps to increase their earnings.

This is an increase from the current 12-hour threshold and will bring an additional 120,000 benefit claimants into the “intensive work search regime”. Benefits can be withdrawn from those who fail to comply.

The UK has more than 1.2mn job vacancies. Workers covered by the new rules will be expected to apply for jobs, attend interviews or increase their hours.

It’s one measure designed to tackle a distinct problem facing the UK: a very tight labour market, which is helping to drive inflationary pressures and leading to staff shortages.

Chris Giles explained the shape of the problem and some of its causes here:

One new problem over the past year has been that the UK now has many more people, especially women, off work and long-term sick. Looking at the data, Michael Saunders, an external member of the BoE’s Monetary Policy Committee, blamed the “side effects of the pandemic, for example long Covid and the rise in NHS waiting lists”. This new and UK-specific long-term sickness problem casts a dark shadow over both the government’s management of the pandemic and NHS performance, since it was given as much money as other advanced economy health services.

The other new problem category is older professional men aged between 50 and 70. For full disclosure, this includes me. No one should ever feel too sorry for people that have done well in the labour market since the 1980s, but the steep decline in participation suggests that economists, companies and governments can no longer take it for granted that older men with degrees will stay working, no matter what. If we are choosing to do something else, others in society should not mind too much, except for the difficult fact older professional men tend to be higher paid and significant net contributors to the public finances.

There is an obvious policy pitfall here. Neither of these groups — the long-term sick or over-50s men — are going to be affected by reductions or the threat of reductions to universal credit, because they don’t claim universal credit in the first place. But the potential benefits for ministers is the revival of that old political tune about the “undeserving” poor, it gives Conservative MPs a tangible target to blame for the UK’s tight labour market, and it has historically been uncomfortable terrain for Labour to fight on.

But if I was a Conservative MP, what would worry me is that a lot of people who are both working 15 hours and claiming in-work benefits will be employed parents, largely working mothers, who are working part-time while raising their families. I’m not sure that it will work as well, or have as receptive a political audience, as previous versions of this particular political line have had.

Time has come round

An underrated aspect of political change is that UK public opinion is often thermostatic: it turns against public spending and the state when Labour is in office, and warms up to more spending and higher taxes when the Conservatives are in power. Now the latest NatCen social attitudes research shows a majority of UK voters favour higher taxes and higher spending, the highest level to do so since the 1990s.

It’s true to say that the Tories win more often than not, but it’s worth noting that broadly speaking, they do badly when voters decide that the country needs more public spending. It looks, for the moment, that things are heading in that direction.

Now try this

I saw Both Sides of the Blade at the cinema: Honestly I found it astonishing to believe that the same director and actor behind the charming Let the Sunshine In could produce such a terrible film.

It’s the type of bad movie that film critics give rave reviews to: it looks great, has a wonderful soundtrack, and in addition it doesn’t make much sense. See it with the subtitles off, or if you are a French speaker, the sound turned down and it may well be worth your time. Or better still, read Jonathan Romney’s interview with the director Claire Denis instead.

Top stories today

  • Deadline set | Liz Truss wants to settle the post-Brexit row over Northern Ireland before the 25th anniversary of the Good Friday peace deal next Easter, as she seeks to calm tensions with US president Joe Biden on the issue.

  • Pretty penny | Somerset Capital is exploring a sale in a deal that would provide a windfall to business secretary Jacob Rees-Mogg, who co-founded the boutique fund manager.

  • Economists’ warning | The chancellor is set to put the UK public finances on an “unsustainable path” in his mini-Budget tomorrow, which, according to independent analysis by the Institute for Fiscal Studies think-tank and Citi, will create a £60bn-a-year hole in the budget.

  • ‘Not a bluff’ | Vladimir Putin has ordered the mobilisation of army reservists to support Moscow’s ailing campaign in Ukraine and warned that he would use Russia’s nuclear arsenal if its “territorial integrity” was “threatened”.

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Source: Financial Times