Tories are ‘politically scarred’ by Liz Truss, says Jeremy Hunt

Jeremy Hunt, chancellor, has admitted the Conservatives are still dealing with the “political scarring” caused by Liz Truss’s shortlived premiership, as he confirmed his fight to save his own Surrey seat was “on a knife edge”.

On the day inflation returned to the Bank of England’s 2 per cent target, he said “the economy has turned a huge corner” as he warned that Labour could wreck the recovery by caving in to inflationary public sector pay demands and putting up taxes.

Speaking to the Financial Times, Hunt said he “totally disagreed” with the notion that this would be a strategically beneficial election for the Tories to lose because of the fragile state of the public finances.

Voters believe that whichever party wins the election on July 4 will be forced to raise taxes, which are already at their highest level in 70 years.

Hunt said real wages were rising and the public finances had been stabilised, but he admitted that his party — which is trailing Labour by 20 points in the polls — was still suffering from the hangover of Truss’s disastrous 2022 “mini”-Budget.

“I can’t pretend it was anything other than a very unfortunate period,” he said. “But the political scarring is probably greater than the economic scarring.”

He stressed that Britain’s performance on growth and inflation since 2022 was strong compared with other G7 countries. “We reversed the mistakes in the ‘mini’-Budget very quickly.”

Labour has argued that the economic damage from the period is still being felt by homeowners who had to remortgage at the time.

The chancellor, speaking in the picturesque town of Godalming in his constituency, insisted Britain’s economy could return to growth “closer to 3 per cent than 2 per cent”, but said Labour would fail to make the tough decisions needed to fuel the recovery. 

Despite telecoms billionaire John Caudwell — a former Tory donor — backing Labour on Tuesday, Hunt claimed business leaders were not convinced by Sir Keir Starmer, despite his “smoked salmon and scrambled egg” charm offensive, and were worried that Labour would introduce “French-style labour laws”.

Asked about Caudwell’s endorsement of Labour, Hunt said the party had been “spectacularly unsuccessful” in getting big-name business backers.

He said a recent letter to The Times signed by 120 executives was lacking big hitters. The Conservatives said none was a current FTSE 100 chief executive. “If you talk to these people, they recognise that Rishi [Sunak, prime minister] and I have done a good job,” he said.

Hunt insisted the economy will flourish if the Tories are re-elected, and that a projected 1 per cent annual real-terms increase in public spending until 2029 is manageable with efficiency savings and pay restraint.

“You won’t get that with Labour,” he said. “They are funded by public sector unions and find it notoriously difficult to take difficult decisions on pay and productivity.”

He shrugged off suggestions that Rachel Reeves, shadow chancellor, would represent continuity in economic policy, or “Heevesianism”, as it has been dubbed. 

“Rachel Reeves isn’t John McDonnell,” Hunt said, referring to Jeremy Corbyn’s left-wing shadow chancellor. “But it’s not good enough, not being Jeremy Corbyn. You have to have a plan for the British economy.”

“If you’re going to make the UK competitive and have a competitive business tax regime that encourages investment, you have to be prepared to take difficult decisions on public spending.”

Hunt argued that Labour would increase taxes on better-off voters, including raising capital gains tax and taxes on pensions, rather than make tough choices to restrain public spending. 

He said some voters were worried about Starmer winning too well. “Labour with a supermajority would have carte blanche to raise taxes, which would be in line with their instincts.”

Some have argued that because of the tough choices facing any future chancellor — with the current tax burden and public services fraying — that this would be a good election to lose. He firmly rejects that idea.

In that case, would he regret possibly handing over an improving economy to his political opponents, just as former Tory chancellor Ken Clarke did in 1997? “Ken Clarke did what good Conservative chancellors do — they run the economy extremely well,” he said.

Yet instead of conducting a victory lap around broadcast studios after inflation returned to 2 per cent, Hunt spent Wednesday morning canvassing for votes in Godalming and Ash, a new constituency with a notional Tory majority of just over 10,000. 

“It’s on a knife edge,” Hunt said, pointing to polls showing the seat could go either way. He said the Liberal Democrats, who hope to claim a significant political scalp on July 4, were “formidable opponents locally”.

Several MRP polls that make constituency-level forecasts have predicted that Hunt would lose the seat.

Hunt, born and raised locally, has injected at least £120,000 of his own money into the local Conservative party in Surrey since the last election, including £50,000 last year.

Asked why he was doing it, Hunt said he wanted to represent the area where he grew up, but admitted: “There’s probably something a bit foolish and emotional about it.”

Hunt insisted that he was not standing again in the hope that he might make another run for his party’s leadership. He was defeated by Boris Johnson in a run-off in 2019.

“That gene has been excised from me,” he said with a laugh, when Firas Nazzal, a local carpenter, urged him to have another go. But Hunt will fight for the Tories to stick to the centre ground. “We definitely need to have a broad appeal,” he said.

In particular he believes the Tories must have more to say to younger voters. “It’s really important the Conservative party thinks hard about broadening its appeal across generations.”

Hunt joked that there was “nothing planned” for Johnson to endorse his candidacy — as the former premier has done in some Tory seats. Sunak has not campaigned locally either.

A defeat for a sitting chancellor, especially one representing a wealthy tract of Surrey commuter belt, would be a totemic result if the Conservatives were ejected from power.

But the chancellor insisted he would continue to work in public service whatever happens on July 4, rather than cash in on his experience at the Treasury with a City role.

“I’ve sold my business,” he said, referring to his education company Hotcourses. He reportedly made £14mn from the sale in 2017, but declined to say exactly how much. “I’m not looking for a future in the private sector.”