Camilla TOMINEY
The Prime Minister had already been likened to the PushmiPullyu, Dr Dolittle’s doubleheaded llama, in his struggle to save both lives and livelihoods during the coronavirus pandemic.
But as his Chancellor yesterday delivered a bipolar spending review urging both a tightening of belts and a splashing of cash, observers could have been forgiven for thinking Rishi Sunak had been taken hostage in the Great Glass Sea Snail of Hugh Lofting’s famous children’s books.
In what was undoubtedly a speech of two halves, the 40-year-old Treasury rookie was at pains to lay bare the economic calamity hurtling towards us. “Our health emergency is not yet over,” he warned. “And our economic emergency has only just begun,” before pledging to spend a further £55 billion on Covid-19, on top of the £280 billion bill already racked up.
The Office for Budget Responsibility was forecasting the economy would shrink by over 11 per cent this year, and here was Mr Sunak not only hiking departmental spending by £15 billion but also upping capital spending by £27 billion to deliver a “once-in-alifetime investment” on infrastructure.
Tories are all for promoting growth but, as Mr Sunak was forced to admit, our economic output is not expected to return to pre-crisis levels until the end of 2022. Was he really proposing to spend our way out of debt spiralling to 97.5 per cent of GDP in 2025-26?
The somewhat schizophrenic nature of the claims caused Conservatives to speculate as to whether Mr Johnson had been wielding his red pen. For it is no secret in Tory circles that he does not appear to share Mr Sunak’s increasingly grave concerns about the state of the public purse.
As one veteran MP put it: “I don’t think the Prime Minister has ever been too worried about the nation’s finances. He’s always been more concerned about losing elections.”
Having won an election on the back of a manifesto guaranteeing 50,000 more nurses, 40 new hospitals, and 20,000 extra police officers, he was never likely to let a pandemic-shaped hole in the budget stand in his way.
Similarly, his “levelling-up” pledge was honoured with a new dedicated £4 billion fund – on top of £100 billion already being splurged on housing, rail, roads, mobile connectivity and green energy. Mr Sunak did not just appear to be singing from Mr Johnson’s hymn sheet, but performing in a
Treasury orchestra reciting his greatest hits. And fiscal discipline appeared to be playing second fiddle. The only red meat that seemed to survive the mincer for prudent Tories was the £4 billion cut to foreign aid.
Mr Sunak has long committed to a jobs-first approach, and thanks to his furlough scheme the unemployment rate is lower than in Italy, France and the US. Yet when the scheme is wound up next March, he knows that what he has given with one hand he will have to take away with the other. As he surmised: “We have a responsibility, once the economy recovers, to return to a sustainable fiscal position. This is an economic emergency.”
He spoke of making tough choices. In this, Mr Sunak appeared to signal a divergence from the big-state approach that has been advocated by Mr Johnson as he has been forced to pivot from a libertarian to authoritarian to “save the NHS”.
For there was more than a touch of Thatcherite self-sufficiency in the Chancellor’s concluding words about “the individual, the family, and the community” becoming more responsible for their future health, wealth and happiness.
The highest sustained level of public investment for more than 40 years was “not enough” to create a better nation. As if sending a secret signal to Mr Johnson, and to the country, he added: “We cannot point to a shopping list of announcements and feel the job is done. The spending announced today is secondary to the courage, wisdom, kindness and creativity it unleashes.
“The future, this better country, is a common endeavour.”
One of the youngest Chancellors had put on his big boy pants – and now it was time for the public to do the same.
The reaction from the great Conservative family remains to be seen. While many will be frightened by the idea of printing more money to facilitate cheap government debt, they are not likely to balk at increased capital expenditure, provided it is well judged. That means fewer HS2S and green-fangled projects which carry little public support, and more fast-track, job-rich schemes.
There will also be an inevitable clamour for the Chancellor to break free from the Treasury orthodoxy of higher taxes, and lower them instead, with a loosening of regulations to boot.
But most of all, they will be crying out for more help for small and medium sized businesses when the proverbial hits the fan next year.
If Mr Sunak really wants to channel his inner Maggie, he would arguably be wise to reignite her pride in this nation of shopkeepers. Only that way does he stand a chance of retaining his popularity while having to make the unpopular decisions the Prime Minister seeks to avoid.
Most of all, Tories will be crying out for more help for small and medium sized businesses when the proverbial hits the fan next year