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Liam Booth-Smith is the Chief Executive of the think tank Localis.

When the British people put the Conservatives back in office in 2010 it did so on the basis of a promise: that they would rectify the public finances, using as their measure of choice the deficit.

Over the course of the last seven years the Government has extended the deadline for delivery. First it was 2015, then 2017, and now we have 2021. With the lifting of the public sector pay cap, this deadline looks set to be extended further.

Delivering against this promise is arguably the most important strategic goal for the Conservative Party (note I do not say Theresa May’s Government).

Because of the volatile electoral map and potentially negative economic impact of Brexit, the ‘economic competence’ feather has never been more important to the Tory cap – just look at the Party’s inability to discuss the issue during the summer election, and its subsequent punishment.

It stands to reason then, that whomever wins the next election, the Conservatives cannot leave office after a decade, two (potentially three) prime ministers and three (potentially four) different administrations, and not deliver on the central promise made to the British people during the spring of 2010.

The lifting of the public sector pay cap is bad policy and worse politics. Beginning with the latter, May and the Conservative Party will secure no benefit from the act.

Putting to one side any question of morality or fairness, the Prime Minister looks like she has been bounced into the decision by a bad general election result and Labour’s doggedness on the issue. Before the election her manoeuvres leftwards looked like tanks being parked on someone else’s lawn. Now it looks like she’s being dragged in chains.

In policy terms lifting the cap by between 1.7 per cent and two per cent will mean a relatively minimal rise in the take-home pay for those ‘benefiting’ whilst irritating workers whose pay reviews are further down the line and, therefore, are not in immediate receipt of this new ‘largesse’.

Furthermore, a great many workers who ostensibly provide a public service are not eligible for this rise because they have transferred into the private sector in the last ten years via outsourced contracts, public private partnerships, and the TUPE process – with many new entrants employed on informal contracts including ‘zero hours’ arrangements.

The argument goes that the public are tired of austerity. I think it’s more likely the parliamentary Tory party is tired of austerity. Having to make the sensible case for deficit-reduction is a thankless task, and yet the argument for sound public finances remains.

The most dangerous aspect of this lurch toward a fiscal loosening is the implicit acceptance of the Corbynista analysis of what is and isn’t working in the public finances and wider economy.

Put simply, all the evidence suggests the nation is working – albeit in a way that defies all economic orthodoxy, with wages stagnating despite the economy increasing. Moreover, the UK remains a prodigious job-creating machine, with record employment levels above 75 per cent. Significantly, the private sector produced 96 per cent of the 379,000 extra jobs created in the year to July.

Tacking insensibly leftwards fiscally would be politically fatal. Time and again the electorate, when confronted with the real thing or facsimile copy, choose the real thing. Perhaps six months ago the party, media and public were willing to let May wear the revolutionary cap and the kitten heels, but no more.

The only way the Conservative Party stands a chance at the next election is by being the best version of itself it can be, not an ersatz version of something else.

76 comments for: Liam Booth-Smith: The lifting of the public sector pay cap is bad policy and worse politics

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