One could forgive Rishi Sunak if he pined for an easier life. Whilst politics at the top table is rarely a comfortable experience, arguably no peacetime Chancellor has had to endure an in-tray quite as daunting as his.
Indeed, so starkly symbolic were events on February 21st 2022, that I would wager any aspiring TV dramatist would reject them for being too obvious. At precisely the same moment as the Prime Minister was finally rolling back the frontiers of the Covid-19 state, Vladimir Putin was promising to ‘defend’ two separatist, pro-Russian ‘states’ in Eastern Ukraine. In a heartbeat, we went from pandemic to war; from the gravest crisis this country has faced since World War Two, to Europe’s biggest subsequent conflict. And poor Rishi must pay for them both.
Still, for the ambitious politician, significant events are an opportunity to display your political character. How you respond will, as Tony Blair is fond of saying, define you in the eyes of the public far more clearly than anything your opponents can muster. Therefore, make no mistake: the Spring Statement is a political judgement day for the Chancellor. Both his colleagues and his country are looking to him for decisive leadership on the economic front. Is he capable of displaying a clear-eyed response to the new geopolitical world we live in? Or will he default to a Treasury world view that, in its over-indexing of fiscal discipline, might place a strategic brake on the UK’s power position.
The early signs are not encouraging. For though the Chancellor has shown admirable mettle resisting siren calls for badly targeted tax cuts, the measures trailed so far do not much inspire confidence he can rise to the occasion. To be sure, I would not expect his headline policies on mitigating the cost of living to be in the newspapers before he speaks tomorrow lunchtime. Nevertheless, what has been briefed – a cut to fuel duty here, a slight easing of the National Insurance rise via higher thresholds there – does not leave one with the impression he grasps the gravity of the situation. Households are about to face the largest sustained annual hit to living standards since the 1970s and the pass-through of inflation costs from the war, not to mention China’s Covid-related shutdown, has barely begun. For the Treasury to be downplaying the size of the intervention tomorrow as less than a ‘mini-budget’ seems at odds with any sense of political reality. Meanwhile, for the Chancellor to go out of his way to knock down calls for more defence spending seems outright troubling.
Of course, the Chancellor displayed similar ostrich-like tendencies during the pandemic. Unlike many of his colleagues, he started that crisis strongly with his furlough scheme – one of the most gargantuan, important and ultimately successful policies in the history of the UK state. Yet as the performance of the UK state improved during Covid, the Chancellor instead seemed determined to atone for his initial brilliance by picking unwinnable fights over small sums of money, including the various skirmishes with Marcus Rashford.
There are two hypotheses for this peculiar behaviour, both somewhat persuasive. One, that he was merely caught triangulating between the rock of Treasury bean-counting and the hard place of cash-hungry Covid-battling departments. Two, that despite furlough’s success, being primarily known as the author of the UK’s largest state intervention into the labour market sat uneasily with his self-image as a low-tax, small state, fiscally conservative heir to Osborne-era Toryism.
Well, either way his game is up again. Fiscal consolidation is hard at the best of times, but you do not need to be an economic historian to know it is nigh on impossible during war or crisis. The thing about the Coalition era is that consolidation then was elevated to the government’s entire raison d’etre. That has never been the case under Boris Johnson, but it is also hard to believe someone as politically astute as George Osborne would bother to try paring back spending at the start of a new Cold War.
For whilst the Treasury may well think that Boris Johnson or Tory backbenchers have a poor grasp on fiscal reality, the political reality is that war and deadly disease are always going to be higher order political concerns than the public finances. Moreover, inflation is simply a more troublesome economic problem than a budget deficit or employment crisis. Like those issues it hurts the poorest most of all, but unlike those issues it also affects just about everyone. Rich and poor alike are thus bound together in a universal and politically toxic concern.
This is worrying because shoring up the home front is mission-critical in our battle with Putin’s Russia. Yes, Putin has relearnt a hard lesson about democratic systems and their extraordinary ability to mobilise in crisis during the last few weeks. But that does not mean his long-term strategic bet on our apathy or short attention spans will not bear fruit if we fail to grasp the nettle.
Tomorrow the Chancellor needs to shelve his spending scruples and show genuine boldness on welfare, energy prices and targeted tax relief. If he persists with the pretense there is a limited amount he can do, then, as with Covid, he should be under no illusions that he will be back before his colleagues rectifying that mistake soon enough. And if that happens, the country will surely view him as someone who is merely shaped by events, rather than someone capable of shaping them.
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