The Conservative Party, under the leadership of Kemi Badenoch, is poised to introduce a new economic “golden rule” aimed at reducing government borrowing and taxes. This announcement will be a centerpiece of Badenoch’s keynote speech at the party’s conference, signaling a strategic shift in economic policy.
The proposed rule mandates that half of all savings achieved by a future Conservative government will be allocated to deficit reduction, addressing the gap between government spending and tax revenues. The remaining savings will be directed towards policies designed to stimulate economic growth, including tax cuts.
Fiscal Responsibility and Economic Growth
Badenoch is expected to assert that the Conservatives are the sole party with a viable plan to rejuvenate the economy. “It starts with fiscal responsibility,” she will emphasize. “We have to get the deficit down and we must also show how every tax cut or spending increase is paid for.”
In her speech, Badenoch will criticize the Labour government, accusing it of jeopardizing the UK’s financial stability through a “borrowing and tax doom loop.” She will argue that Labour’s economic strategies are unsustainable, equating government borrowing to “stealing from our children and grandchildren.”
Conservative Economic Commitments
At the conference, the Conservatives have pledged to save £47 billion annually through cuts to welfare, the civil service, and foreign aid, should they return to power. Additionally, they propose £9 billion in spending commitments, including a £5,000 tax rebate for young individuals and the abolition of business rates for High Street shops.
Badenoch aims to restore the party’s economic credibility and distance herself from former Prime Minister Liz Truss, whose tax-cutting mini-budget in 2022 led to financial market turmoil and her subsequent resignation. The Tory leader also seeks to reclaim the mantle of financial prudence from Labour, which has positioned itself as the party of sound money and economic stability since gaining power.
Challenges and Economic Outlook
The government faces a challenging autumn Budget, complicated by a Labour MP rebellion that previously thwarted plans to save billions on welfare spending. Economists suggest that taxes may need to rise if Chancellor Rachel Reeves is to adhere to her self-imposed borrowing rules to fund public services.
The Conservatives are focused on reducing public sector net borrowing (PSNB), the difference between total government spending, including capital investments, and total tax receipts. The Office for Budget Responsibility forecasts a decline in PSNB from £137.3 billion (4.8% of GDP) this year to £74 billion (2.1% of GDP) by 2029-30.
Party sources express skepticism about Labour’s deficit reduction plans and doubt the OBR’s forecasts will materialize as expected.
Historical Context and Political Dynamics
Deficit reduction was a cornerstone of David Cameron’s coalition and Conservative governments from 2010. Under Badenoch, the party is revisiting this approach, with her rhetoric echoing that of former Chancellor George Osborne, who implemented years of spending cuts to reduce the deficit.
Meanwhile, Reform UK has also promised significant savings to offset substantial spending on tax cuts, the NHS, and defense. At the conference, Conservatives have labeled Reform UK “socialist” due to their increased spending promises and nationalization plans. The Conservatives, like other parties, have intensified their critiques of Reform UK, which currently leads UK-wide opinion polls.
Leadership and Future Prospects
Badenoch’s leadership has been under scrutiny at the Manchester conference, her first as Conservative leader following the party’s defeat in the 2024 general election. Despite poor performance in recent local elections and lagging behind Reform UK and Labour in polls, Badenoch remains optimistic.
Speaking to the BBC, she stated, “I’m not losing. I’m going to be winning.” Conservative chair Kevin Hollinrake affirmed Badenoch’s leadership, asserting she would “absolutely” remain leader at next year’s conference. “Kemi Badenoch has got the backbone to do what needs to be done with this country. She’s got the strength of character. She says what she means, and means what she says,” Hollinrake told the BBC.
As the conference unfolds, the focus will be on whether Badenoch’s economic strategy can revitalize the Conservative Party’s fortunes and restore public confidence in their fiscal management.
