The conservative challenge for Sunak
This time last year, with the country in a brief respite before the next lockdown kicked in, the great fear was unemployment. Millions of people were being paid by the Government to stay at home and the expectation among economists was that when the furlough scheme unravelled many would lose their jobs. The jobs retention plan was intended to last just a few weeks before being extended into more than 18 months at a staggering cost. The furlough finally ended last week, having been gradually wound down with few of the anticipated job losses.
It is one of the more remarkable aspects of these extraordinary times that the biggest drop in output in almost 300 years has not inflicted greater damage on the economy. Given that there was no plan for how to shut down a modern democracy for more than a year, this has been a considerable achievement for which Rishi Sunak, the Chancellor, and his advisers deserve great credit.
Far from triggering mass unemployment, the UK has record job vacancies and, as has been seen in recent weeks, even labour shortages in some areas. But concerns remain for around one million employees who stayed on furlough until this month and for whom a £500 million interim extension scheme has been set up.
While the news on the jobs front has been encouraging, Tories have been alarmed by the apparent conversion of the Government to the politics of high taxation and state intervention. Mr Sunak sought to assure the conference that tax cuts were still on the agenda but would be conditional on repairing the public finances after the pandemic. Adding to the soaring debt would be “immoral and un-conservative”.
His determination not to borrow more forced the Prime Minister’s hand when it came to funding the NHS this winter, with the extra money coming instead from an increase in National Insurance contributions. This has undermined the party’s credibility as champions of low taxes but both the Chancellor and the Prime Minister are adamant that they remain wedded to Thatcherite nostrums.
Mr Johnson earlier this week said Mrs Thatcher would not have borrowed more in the current circumstances to pay for public services and that may well be true but she may have tried to trim back spending. Pumping yet more cash into the NHS without any reforms risks sacrificing the party’s fiscal reputation for little in return.