Fiscal rules and strong chancellors are unpopular, but they keep tax rises at bay

Ionce showed a distinguished Italian finance minister round No11 Downing Street. As I led him through the connecting door between No10 and No11 he marvelled at the close link there must be between the PM and the chancellor, and how it must lead to excellent cooperation.

Alas too often that has not been the case, though it remains a truism that the relationship between the PM and the chancellor is the most important in any government. A chancellor needs the support of the PM: he is always in a minority in having to have regard to the affordability of all the pet projects of other ministers. The chancellor also needs to be confident enough of his own position to be able to argue candidly with the prime minister.

It is understandable that Boris Johnson wants to have the same close relationship with his chancellor that David Cameron and George Osborne enjoyed. The problem is that the terms on which the PM offered to reappoint Sajid Javid were, as he said, not ones that any self-respecting minister could have accepted. Mr Javid showed great integrity in refusing to sacrifice his advisers for the sake of his own position, and one must feel sympathy for him.

Demanding the chancellor sack his special advisers looked like No10 wanting to take control of the Treasury, the guardian of the nation’s finances. And if No10 thinks it can control and run the Treasury, why not the NHS or the Department for Transport? But if you are going to run everything from No10 you run the risk you will clog up the works, cause endless delays and make bad choices.

There have always been politicians who regard the Treasury as an ideological nuisance frustrating all progress as it tries to ensure money is spent wisely and within some control. Chancellors are regularly accused by colleagues of being non-political, lacking imagination and usually are kept well out of sight during general elections.

There was a certain irony in No10 seeking to make an issue out of the chancellor’s choice of special advisers, of which there are now over 100 across Whitehall; 24 of them in No 10 alone. Mr Cummings has a point in being concerned about a lack of discipline. But there is one simple way of ensuring fewer self-serving leaks, and that is an across-the-board reduction in the number of Spads. There is a need to bring outsiders into Whitehall who have genuine specialist knowledge and experience. But there are far too many Spads who have no particular expertise, are just glorified press officers and partisan cheerleaders for their ministers.

If there was any real policy issue between the PM and Mr Javid it was probably over the now famous “fiscal rules”. These have become an issue because of the Government’s intention to invest unprecedented sums into infrastructure. Since we are living through a period of astonishingly low interest rates worldwide, it is argued that infrastructure has no real cost and is something of a free lunch. There is some force in this argument. If you can borrow at rates below inflation for 30 years it makes sense to borrow more to invest in projects that have a genuine economic return. But low interest rates cannot be guaranteed to last forever, hence the need for rules to keep spending within limits and make sure we do not risk an unaffordable burden of debt.

For this reason, Mr Javid fought to ensure that the Conservative manifesto, while advocating big increases in infrastructure, also made clear that spending would be within a framework of rules about borrowing and deficit levels. There is a suspicion that the PM’s attitude to spending is more Reagan than Thatcher. Reagan didn’t believe that deficits matter, he certainly ignored them, and his successor George Bush Snr was left to clean up the mess with tax increases.

We don’t want that here. Recently, Conservative supporters were horrified by the kite-flying of swingeing tax increases including a “mansion tax”. The UK’s tax burden is already near a historically high level. Mr Javid was in an awkward place. He is, by instinct, a tax cutter but he was also insisting, rightly, that the fiscal rules needed to be observed. Rishi Sunak has been chief secretary in charge of government spending so he understands the issues. But he will face exactly the same dilemma. It seems improbable that he will jettison the fiscal rules, and the PM can hardly dispense with another chancellor.

Let us hope the new partnership works and that the new chancellor will find ways to make economies, ensure infrastructure projects are properly managed and keep spending under tight control so that we avoid penal tax increases. It will be a challenge.

It was ironic that the issue that split the PM and Sajid Javid was special advisers. There are over 100 of them across Whitehall; 24 of them in No10 alone. The easiest way to reduce leaks would be to sack some