Unfettered control Power struggle at heart of government has cleared the way for a bold new era of ‘Rishinomics’
Chancellor is a far easier sell than the wonk-ish, secretive special adviser, writes Matthew Lynn
An industrial policy that would reshape the British economy. A new generation of tech giants that would make London a cross between San Francisco and Singapore. A massive programme of infrastructure and a shake-up of the machinery of government that would bring in visionaries and super-forecasters to turn the civil service into a force for change. Dominic Cummings was, to put it mildly, a controversial character, but he was always buzzing with ideas and policies.
As he departs, who will take his place as the second most important person in the Government, and arguably the most important, given that Boris Johnson, the Prime Minister, is hardly known for his appetite for administration or hard work? That much is obvious. Rishi Sunak, the Chancellor. What is less obvious is what he wants to do with that power.
We know he can deliver one rescue package after another. But this is the moment to define what Rishinomics actually means – and how it can reset the economy.
Only a few people will be sorry that Cummings has left the Government. He carried so much baggage from the Brexit referendum, half the country was always going to hate him. Even so, he leaves a substantial legacy. He played as big a role as anyone in securing Britain’s departure from the European Union, first by winning the 2016 referendum, and then repeating the trick at the 2019 election with a handsome majority for the Tories.
If you wanted a three-word slogan, there was no one better able to craft a winning one. But there was more to him than that. He also had radical ideas on reshaping the Government, and reinventing the British economy.
In truth, Dominomics was a mixed bag. True, he was right about a couple of big things, which is more than could be said for many people in government. The Treasury is always obsessed with raising taxes, and balancing the books, but Cummings pushed back against that. This is precisely the wrong moment to even think about raising taxes, and even worse to talk about it. And he was determined that if Brexit was to be worth all the hassle, it had to be turned into an opportunity for reforming the British economy so it delivered higher growth, especially for the regions that had been left behind over the past 20 years. But, like his boss, he was too keen on infrastructure (it costs more than you think, and never delivers the pay-off expected) and his ideas on industrial policy were just whacko.
In truth, the state is very rarely able to pick the winners of the future, and the British state is especially hopeless at it, while the chances of creating a new Apple or Amazon with a handful of brainiacs in Westminster are so remote it is not worth the effort of trying. Overall, he had far too much faith in the power of government.
One point is surely clear, however. Now he has departed, the second most important figure in the Government, and by far the biggest influence on economic policy, will be Sunak.
Unlike Cummings, he is genuinely popular: his fluency, and easy-going empathy, is a far easier sell than the wonk-ish, secretive special adviser.
As he has shown through the pandemic, he can master his brief, think innovatively and respond to an emergency. Yet the Chancellor, perhaps not surprisingly for someone we had scarcely heard of a year ago, remains an enigma. We know he is suspicious of lockdowns, and in favour of markets and business. But what should Rishinomics look like? It should have three main strands.
First, set out a new path for the public finances. In the wake of Covid-19, and with near-zero interest rates likely to last for a generation, we can live with a debt-to-gdp ratio that is far higher than we are historically used to. If we owe 110pc of GDP, it is not the end of the world. Raising taxes sharply, as his Treasury mandarins will no doubt be pushing him to do, would be the very worst move we could make.
Instead, we should be cutting taxes, especially on employment, both to boost demand and to create the millions of jobs that will be required to replace all those that will be lost.
Next, deregulate. It is almost four decades since the UK last had a government willing to slash red tape and free up entrepreneurship. For all his flaws, Donald Trump showed that was possible in the US, with bold tax cuts and legislation that forced Congress to repeal two regulations for every new one it created. No government department is likely to create a British tech giant, but it is just possible an entrepreneur could.
Finally, reform and simplify. We have a tax system that has grown so complicated even the most skilled accountant can hardly understand it.
The Covid-19 crisis is a great opportunity to argue that our bewildering, wealth-destroying range of taxes should be scrapped.
Instead, we should start with a blank sheet of paper, creating a system designed to raise 35pc of GDP with as little damage as possible.
For all his faults, Cummings was a radical force. If leaving the EU proves a success, he will have a lasting legacy. With his departure, however, Sunak is now in sole charge of economic policy for at least the next three years.
In the face of a deep recession, it is hardly an easy moment. But if he is bold and radical, the moment is there to be seized, and he could yet be the most significant occupant of No 11 since Gordon Brown.
‘The Covid crisis is a great opportunity to argue that our bewildering range of taxes should be scrapped’