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The public-sector pay debate is poisoning the government

Boris Johnson and Michael Gove's claim public sector pay can be increased without raising taxes has been officially rubbished. Credit: PA

The chaos in the government is magnificent.

Every minister and MP has a different but obviously important view on why the party didn't perform nearly as well as it expected in the recent election.

And because these views are sooooooo important, collective cabinet responsibility be damned, they're going to let us all know what they think.

Glorious it therefore is to be a political journalist in the summer of 2017. But for the rest of you: well it's either comedy or tragedy depending on your affiliations.

What I am particularly enjoying is the comprehensive trashing by Tory MPs of almost the only clearly distinctive policy of substance their party has had since 2010, which is to balance the government's books.

Conservative-led administrations have not raised the scale of public sector pay increases as they emphasised the need to reduce the deficit. Credit: PA

As you know, because I have been banging on about this for years, it's perfectly reasonable to argue that the Tories' putative fiscal rectitude was economic silliness: there has been a credible case that a bit more spending and borrowing in our depressed economic conditions would have generated incremental, tax-generating growth.

But the Tory party of Cameron and Osborne, and of May and Hammond before that fateful decision to go to the country, consistently argued that with the national debt having more than doubled since the 2008 crash - and still rising - they would win credit and credibility among voters and investors for at least talking a tough talk on debt reduction (although in practice they've unerringly missed their deficit reduction targets).

And whatever you think about the economics of the party's pledge to generate a Budget surplus, the politics worked at the 2015 General Election - when Cameron and Osborne won a bigger majority than was widely anticipated.

Chancellor Philip Hammond was a rare presence in the Tory election campaign that played down the economy. Credit: PA

Now, eccentrically perhaps, Theresa May failed to make an economic argument at all in her recent campaign.

And having recently ditched pretty much every policy of note in her manifesto, it is difficult to know what her party actually stands for, if not a plan to halt the rising of the national debt.

Now here - at last - is the point I have been meandering towards.

Which is that Gove and Johnson are officially talking nonsense when suggesting that public sector pay can be increased without raising taxes or fundamentally changing the government's approach to reducing the deficit.

I say that's official, because it is the unambiguous view of the Office for Budget Responsibility - the government's own watchdog of its finances.

Jeremy Corbyn's Labour election campaign called for an end to the 1% public pay sector ceiling. Credit: PA

You see, at the time of the last budget, the OBR said it was touch and go whether the Treasury would balance the books by the target date of 2025-26 - and it presented two plausible scenarios, out of just three, which saw the government failing to eliminate the deficit, even without any new spending commitments.

In other words there is no money behind the back of the sofa to finance an increase in the pay of teachers, nurses and police officers greater than the ordained 1% ceiling.

That means the government has two choices:

  • it could finance such pay rises via a £6bn per years or so tax rise, which many Tories would find as palatable as a steaming plate of sick;
  • or it could publicly concede that the Labour Party of Jeremy Corbyn and John McDonnell are the economic gurus and have won the fiscal argument - and that too would be as edible for most Tories as an ice cold plate of the same noxious substance.

So at a time when this government's grip on power is tenuous and when the authority of the prime minister is nebulous, Tory MPs may be precisely wrong that giving public sector workers a real pay rise will be the rehabilitation of their party; it could equally confirm to much of the electorate that they stand for precisely nothing of significance.