The Waugh Zone Tuesday July 4, 2017

The five things you need to know about politics today.

As the Cabinet meets this morning, ministers will look united as they stroll up and down Downing Street uniformly refusing to answer yelled questions from reporters. But behind the scenes, on public sector pay, they look even more like ferrets fighting in a sack.

After days of fellow ministers urging him publicly to act on the issue, Philip Hammond last night put his foot down – and kept it on the austerity accelerator. In his speech to the CBI, he said: “It would be easy to take our foot off the pedal. But instead we must hold our nerve.”

The speech, which was not briefed beforehand and was even described by aides as a “b-2-b” [business-to-business] address, was too late for the morning papers yet had several telling lines. In what sounded even like a tribute act to Theresa May’s “nothing has changed, nothing has changed!” classic hit, the Chancellor said he wanted to be fair to both public sector staff and the taxpayers who paid their wages, declaring “that approach has not changed”.

Hammond made clear he saw lots of the calls from colleagues as pay day moans, risking tax rises that could derail his central belief that only economic growth can pay for pay hikes (“the only sustainable solution is to increase the trend rate of growth”). Yes he said “we continually assess” the situation, yes he said he recognised “the British people are weary after seven years hard slog”. But he crucially warned that tax hikes could not be on “business and wealth creators” (suggesting he’s not keen on calls to delay corporation tax cuts or axe higher rate pension relief). “So the serious question to the electorate cannot be, ‘would you like us to tax someone who isn’t you to pay for you to consume more?’, but, ‘would you be willing to pay more tax to consume more public services?’.”

That raises the spectre of getting everyone to pay more in tax, a prospect many of his Tory colleagues would baulk at, and which would see Hammond’s own tax ‘bombshell’ explode in his face (remember his rare general election featured a Jeremy Corbyn poster on this very topic).

Norman Lamont yesterday said you can’t dump austerity just because “the electorate disliked” it, Lord Lawson echoed that on Today. Ken Clarke told Newsnight last night Hammond should not start “giving in to the lobby of the week” because “the political bubble’s got seized with this last two, three days, because it’s the public sector trade unions conference season”. Of course, if May says nothing has changed, the Tories could lose a whole generation of teachers and doctors and others Cameron had fought hard to vote Conservative. Maybe that’s why we will get a “divide and rule” solution, with selected ‘frontline’ staff given rises. If only the Tories had a PM who could impose her own authority on the fighting ferrets to give us clarity either way...

It’s the 4th of July, yet for many Vote Leavers the UK’s own Independence Day was the day of the EU referendum victory last June. And for me, one of the most interesting things in Hammond’s speech last night was this line: “There is frustration over the stagnation in real pay growth, driven by the current spike in inflation which itself is due mostly to currency depreciation.”

That sounded very much like he was saying that Brexit was to blame for the pay squeeze. The pound plunged after the EU referendum and remains low, pushing up inflation, which in turn turns that 1% pay rise into real terms pay cuts.

So here was rejuvenated Remainer Hammond basically telling Boris Johnson and Michael Gove it was all their mess and it’s a bit rich of them to start demanding pay rises now. And that sense of a continuing Treasury backlash against the Brexiteers is highlighted by some telling quotes in the Sun, with one minister saying: “Boris cannot stand not being the centre of attention. Intervening on this now is pure attention seeking – ‘look at me, look at me’. It’s pathetic.”

The habit of former Permanent Secretaries tweeting their real views, free of the shackles of office, also kicked in. We’re used to ex Treasury boss Nick Macpherson giving us his views. But yesterday former Foreign Office perm sec Simon Fraser had a real pop too: “Would be nice to think Gove & Johnson care more about #publicsectorpay than about making life difficult for Hammond”.

Still, Hammond’s line that it was Brexit wot done it to public sector workers may not ring true either among Brexiteers or trade unions. The Guardian has a report by the Office of Manpower Economics (which informs pay review bodies) showing it was Osborne’s squeeze from 2010 to 2015 (before the Brexit vote) that did the damage as police officers, teachers, midwives, radiographers, nurses and doctors saw a marked decline in median hourly earnings. Teachers saw a drop by £2 an hour from 2005 to 2015.

As Amber Rudd welcomed Labour’s new shadow Home Office team to the Commons yesterday, Jeremy Corbyn heckled: “They’ll be ministers soon!” The Labour leader was certainly full of optimism as his mini reshufflefinessed chair Ian Lavery’s line that the party doesn’t want to be “too broad a church”.

Having rejected returns to Shadow Cabinet posts for senior centrists Yvette Cooper and Chuka Umunna, there were olive branches to moderates and former critics Gloria de Piero, Roberta Blackman Woods, Karl Turner, Holly Lynch, Melanie Onn and Yvonne Fovargue. An influx of new blood came too, with new Gorton MP Afzal Khan literally on the front bench in Home Office questions just 24 days after being first elected.

Yet it was an ‘old new’ MP, Chris Williamson, whose appointment Corbyn and his team relished most. The veteran leftwing ally of the leader – who’d said pre-surge that winning back his Derby North seat was a ‘test case’ for Corbynism – was given the vital job of shadow fire minister. Not for nothing did Lavery single out the appointment as “a sign that the days of free market Thatcherism are coming to an end”.

And Williamson is on board with Lavery on looking again at reselection rules for MPs. He suggested to ITV News he backed mandatory reselection and gave this stark warning. “MPs need to reflect the political programme that is overwhelmingly supported by Labour members and Labour supporters and if people aren’t prepared to do that then it will be up to members in their local constituencies to find someone else who will.”

Watch new Tory MP Eddie Hughes make one of the best maiden speeches – by complaining everyone else’s was better.

The Tories in Kensington and Chelsea finally seem to have chosen a new leader who speaks human. After Nick Paget-Brown’s stubbornness and talk of “perceived failings”, Elizabeth Campbell delivered a heartfelt apology after she was elected last night: “This is our community and we have failed it when people needed us the most. So, no buts, no ifs, no excuses. I am truly sorry.”

It wasn’t long however before the criticism started. Newsnight said Campbell had pulled out of a planned interview, while some residents objected to her leadership, saying a more radical approach was needed. Meanwhile, survivors of Grenfell have written to Theresa May with 12 demands, including the removal of Sir Martin Moore Bick as public inquiry chairman. New Kensington Labour MP Emma Dent Coad told Today the inquiry should be chaired by someone who understood what it was like to live in a tower block. She also revealed one homeless Grenfell resident was offered a flat in an estate that was soon to be demolished.

In the Commons yesterday, Sajid Javid notably kept open the option of ‘commissioners’ being sent in to run Kensington’s social housing services. He has a speech at the Local Government Association conference today. The LGA Tory chief Gary Porter will warn that current austerity plans will slash core funding for councils by 77% by 2020. Another bill for Hammond to meet if he relents.

In the FT, Nick Clegg (who does know some important people in Brussels) passes on some intel he was told by an official involved in the Brexit talks. He claims that EU leaders were last summer expecting May to make an overture calling for freedom of movement to be reformed, but no such approach was made.

In a nutshell, Clegg suggests London and Brussels could avoid a ‘hard Brexit’ if they agree to revive David Cameron’s plan to curb migration if it gets too high. “With goodwill and a little imagination, EU governments could agree an ‘emergency brake’ on the free movement of EU citizens, allowing governments to impose quotas and work permits in response to unusually high levels of EU immigration (similar to the trigger in the Cameron package).” Both the Tories and Labour say that free movement has ‘to end’, but would either convince voters this was really ending it?

Clegg clearly sees some in Brussels and some in Government as the “sensibles” (George Osborne loves that word) in the debate. Two such “sensibles” in the Cabinet, Business Secretary Greg Clark and Health Secretary Jeremy Hunt, use an FT joint article to suggest the UK should “continue to collaborate with the EU” on drug regulation, suggesting post-Brexit working with the European Medicines Agency. More freelancing or just common sense?

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