Only radical free-market, economic reform will let Sunak keep his job

The centre Right wants a pro-business champion of the small state and a tax system that creates wealth

It isn’t nearly as bad as the decadelong feud between Tony Blair and Gordon Brown. Nor are the arguments as ferocious as those between Margaret Thatcher and Nigel Lawson, or between many occupants of Numbers 10 and 11 Downing Street for years before that.

Even so, no one can mistake the simmering tension between the Chancellor, Rishi Sunak, and the Prime Minister, Boris Johnson. There has already been one threat to demote the Chancellor and the behind-the-scenes briefings are in overdrive.

The Chancellor will be offered plenty of advice on how to stay in office. But the real answer is this. He needs to embark on a radical round of free-market economic liberalism. Why? Because that will align him with the party members, backers and indeed increasingly the voters, at least in the blue wall if not in the red one, tired of big spending and state intervention.

And a project of that scale, especially as it starts to deliver results, will make him impossible to remove. A genial manner on TV always helps. But ultimately it is a bold vision for the post-brexit, post-covid economy that will secure his job – and make sure he remains the natural successor to the Prime Minister.

In some ways it is surprising that Sunak has managed to make it through a whole 18 months in the Chancellorship without any rumours of his removal surfacing. It is longer than most occupants of the office manage.

His predecessor Sajid Javid only lasted seven months. Harold Macmillan got through four chancellors in six years. Long spells at No 11, like Brown’s 10 years or George Osborne’s six, are relatively rare in British politics.

Even so, over the weekend there were reports that Johnson had threatened to sack Sunak, or at least demote him to health secretary, amid disagreements over spending on the NHS and the vast sums of cash the Prime Minister wants to throw at his “levelling up” agenda. There is more tension than at any time in the last year.

Sunak has two obvious defences. He came out well from the Covid-19 crisis. Sure, you can criticise many of the schemes he launched, from the furlough programme to Bounce Back loans to Eat Out To Help Out, but there can be little question they were superbly well executed, and at high speed.

If the rest of the British state could work as quickly as Sunak’s Treasury in 2020 then it would be a lot more effective. And he is popular, both in the Conservative Party and the country. Polls regularly show him as both the most likely next leader and out in front to win an election as well.

For both reasons, he is difficult to remove. And yet, to really secure his Chancellorship, and to cement his position as the Prime Minister in waiting, Sunak needs something more: a bold, radical vision for the economy.

There are two reasons for that. First, plenty of Conservatives have grown suspicious of Johnson’s brand of big government. In many ways, this administration has turned into the most anti-business since the Labour governments of the 1970s.

It spends unlimited sums of money, intervenes in industry, subsidies jobs, threatens tax rises, and regulates anything that moves. Fiscal discipline and free-market reforms are always crucial to the centre right, and Sunak is their natural champion.

Next, it is far harder to dislodge a Chancellor when he is securing the Government’s agenda (which explains why Brown remained in the office so long, despite the furious feuding with the PM) and delivering convincing results.

There is no shortage of places Sunak could start. First, a round of tax cuts. The economy may be growing at a rapid clip this year but that is simply clawing back all the output lost during the pandemic.

We shouldn’t kid ourselves that is real growth. We need to get back to the hard work of improving the incentives to work, of encouraging companies to create more jobs and spurring entrepreneurs to launch more businesses. And by far the best way to do that is by redesigning the tax system so that it helps create wealth rather than just confiscating it.

Next, a long-term plan for the public finances. Covid has been expensive, and so is dealing with the shock of leaving the EU, while the PM is perfectly right that the left-behind regions need more attention.

With interest rates at historic lows globally, debt-to-gdp ratios can safely go far higher than they have in the past. Up to 110pc or 120pc of GDP is acceptable, especially if it is boosting long-term growth.

But it should be accompanied by a constitutional brake that limits the state’s share of GDP to 40pc. That way we can stop government spending growing indefinitely, and keep public finances sustainable.

Finally, and most urgently, the UK needs a round of deregulation to boost its competitiveness. The whole point of leaving the EU was to free ourselves of its over-centralised, overcautious, backward-looking micromanagement of the economy. There isn’t much point if you never use that freedom, however.

From scrapping the ludicrous GDPR rules on data, to the surreal Mifid regulations of finance, to embracing new technologies from vertical farms, to genetically modified food, to flying taxis, artificial intelligence-driven accounting and legal services, to mrna-based vaccines and medicines, there is a huge amount that could be done.

Sunak’s Treasury should be driving that, with a mantra of promoting growth wherever possible.

It is hard to sack a Chancellor at any time. But one who is popular within the party, and is halfway through a radical programme that is delivering genuine results, is virtually impregnable.

The small state, pro-business centre right is in desperate need of a leader, and Sunak, as enigmatic as he remains, is the best candidate for the role.

If he wants to stay in office, and take over as PM, it is vision and bold ideas that will get him there – and not just a genial manner on TV.