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When the Treasury technically escaped the deficit in the current Budget a few weeks ago, the news elicited a variety of responses in Tory circles. They range from hold-the-course to turn-on-the-spending-taps – from Jacob Rees-Mogg, who is sceptical of the calculation, via Boris Johnson, who is searching for a Brexit dividend, to one of the variety of backbenchers who have come to the view that voters have had enough of austerity. Notably, however, what unites MPs across that range of opinion is the view that if there is any money to be spent then the NHS is at the front of the queue.

When Philip Hammond announced in his Spring Statement that there is “light at the end of the tunnel” fiscally, he opened a crack in the Treasury’s defences. The decision to prioritise the partial lifting of the pay cap for NHS staff, particularly lower earners, is a practical corollary of the Chancellor’s words, and was widely assumed to be coming.

However, we can immediately see the difficulty in trying to perform a gradual or partial relaxation of spending restraint. The offer of a pay rise for some NHS employees has only just been made, and the GMB among others have attacked it as “not good enough”, but already it has sparked widespread demands for pay rises from across the rest of the public sector.

The Armed Forces, backed by Johnny Mercer and The Sun, want a rise. So do the doctors, who have asked for an immediate two per cent increase. And teachers now want five per cent – with the possibility of a strike being debated next week. I fully expect other groups to follow suit.

Even if you’re a fiscal optimist, the fact remains that what if any money there is going is extremely limited. Using it in any way – tax cuts, deficit reduction, debt repayment, pay rises, infrastructure commissioning, whatever – is therefore inevitably going to be a beautiful baby competition. The judges may make the winning family happy, but they will upset and offend an awful lot more people at the same time.

The concept of either a hypothecated NHS tax (backed today by The Times) or a bit of Gordon Brown-style rhetorical hypothecation, by which the revenue from a new tax isn’t really ringfenced but is described as being so, might blunt criticism temporarily, even if only by confusing matters. But it won’t make the issue go away – introduce an NHS Tax, and all that will happen is you’ll get a petition calling for a Defence Tax, a Teaching Tax, and all the rest.

In short: maintaining austerity took discipline, but don’t imagine trying to unwind it in an orderly way will be any less testing.

54 comments for: The reaction to the NHS pay offer shows that relaxing austerity will not be as easy as some imagine

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