Britain’s finance minister has been running behind the pandemic. Here’s how he can get ahead
Back in July, I recorded a pointed profile of Rishi Sunak, ‘The Hopeful Chancellor’. Is he, I asked, really the man for the job? At more or less every turn in this pandemic, I argued, he has showed up a week late and a pound short.
This week, I found myself thinking: “Here we go again.” On Monday, I was sitting at the start of the CBI Annual Conference listening to Dame Carolyn Fairbairn, the CBI’s director general, suggesting that the government would need to go further than month-long extension of the furlough to coincide with the November lockdown. And, sure enough, by Thursday, the Chancellor had announced that he was going to do exactly what he said he wouldn’t do: the furlough scheme will be extended to March. Once again, he was playing catch-up with himself.
I’m James Harding, editor and co-founder of Tortoise, and this week’s Editor’s Voicemail is about what the Chancellor can do to get ahead.
I should explain that I spent the first half of the week in the basement of ITN Headquarters – as it happens, the basement that, before the building was redesigned by Norman Foster, was home to the printing presses of The Times newspaper. At Tortoise, we’ve been moderating webinars for the Confederation of British Industry most weekdays since the end of March and they were kind enough to ask me to host the annual conference. This year, it wasn’t the usual big get-together in person. It was a televised event over three days filmed at ITN. And it’s an unusual assignment for a journalist. The business leaders who come are the guests of the CBI; they are not there for cross-questioning or a TV-style interrogation; in fact, you’re not trying to get a story, but trying to give them a platform for what they have to say. But listening to what was, by any measure, an exceptional line-up of CEOs and politicians, economists and mayors, academics and activists, I learned a lot. I came away with a clearer sense of what’s needed from the government – not what Rishi Sunak should have done, but what he should do differently next.
Let’s make no mistake, the chancellor’s decision to swing back to the terms of the Job Retention Scheme – aka furlough – until March is both a big financial and philosophical u-turn. It will cost the Treasury billions. And while he’d rather let the market do its work – i.e. let obsolete businesses fail to make room for innovative new ones to start, grow and hire – he’s back using public money to lay a protective blanket over companies, even if they are not home to the digital and green jobs of the future.
Sunak’s announcement of the Winter Economy Plan six weeks ago and then his tendency to come back every other week since then with further additions, policies and updates is a measure of the difficult, unpredictable world we’re in. And it’s no bad thing to be fleet of foot in a fast-moving crisis. But the chancellor and his team can see that his honeymoon in the Treasury is over. The back and forth on policy is beginning to eat away at public confidence in his judgment and press approval of his performance; it’s beginning to splinter support even among the members of his own party and the naturally sympathetic business community.
So what can he do to get ahead of things? Here are five suggestions:
1. Change the mindset in the Treasury. This is not the time to emphasise, as Sunak did in September, the Conservative Party’s “sacred responsibility” to balance the books; this is the time for the chancellor to recognise that the UK can afford a much higher level of debt-to-GDP and make the case for borrowing and spending with the public, within his party, and inside the Treasury. Economists with more miles on the clock than he has, people like Larry Summers and Mervyn King, all emphasise the low cost of borrowing for government and the need for fiscal stimulus – i.e. government spending, now. Mr Sunak is a fiscal conservative, which is all well and good in normal times. These aren’t normal times and, by now, he knows it. Until he resets expectations on borrowing and spending, he’s going to keep playing catch up. He’s going to be penny-pinching with Marcus Rashford and the campaign for children needing free school meals; likewise in the coming argument over university and student funding; likewise, too, in the argument that is coming over targeted, sectoral support for industries singularly hit by the pandemic. And then, as with furlough, he’s going to have to bow to reality. There’s going to have to be financial support for longer. And it’s going to have to be better targeted. Currently, the Treasury funds jobs, i.e. support through work; it’s going to need to think about people, i.e. more support through welfare too. And it provides support horizontally across the economy; it’s going to need to switch to target support vertically to some industries and sectors more than others.
2. Change the set-up in Treasury. Tony Blair has been arguing since the spring that the organisation of government needs to change; there needs to be a Minister for Test and Trace. By now, I’d have thought, we can see that is right. And this government knows how to move things around when it suits their priorities; after the EU referendum, the government established new ministries for Brexit; it’s rejigged the Foreign Office and the Department for International Development. Brexit, of course, is coming. But the Treasury now needs to reorganise and reorient for the biggest economic story of our lifetimes: the pandemic. Ministers need to be assigned not just tasks, but titles and public-facing responsibilities for dealing with the coronashock:
- A minister for financial support in the pandemic – someone tasked to make sure that people have enough money to isolate when contacted by Test and Trace, who focuses on business loans, grants and debt to SMES, who addresses sectoral financial packages.
- A minister for young people – someone who is seen to be focused on job creation, recruitment incentives, further education funding and business investment in skills.
- A minister for infrastructure investment and green finance – someone who is turning “build back better” from a slogan into a visible plan and project of works.
The Treasury will tell you that, between them and the Business department, all of these roles are filled. But you can’t see who’s in charge of what matters, who’s the champion of key people and parts of the economy. And if you don’t know who’s taking responsibility for things, you conclude, worried and wearily, that no-one is.
3. Get more than religion on infrastructure and climate, get icons. It’s all very well to talk of “levelling up”, “build, build, build”, “shovel-ready”, this and that. But you’re better off having a handful of big ideas to shout about. There won’t be just five big favourite projects of the Johnson-Sunak government; but choose five to champion. Make it clear what the iconic infrastructure projects are that you’re backing. And then back them, publicly, financially and relentlessly. People will begin to think that, at last, you see the UK is still working off a post-war operating system well into the 21st Century.
4. Get people together. When you hear from Mark Drakeford, Wales’ first minister, that he only heard about England’s lockdown on the radio on Saturday morning, you know that the four nations of the UK aren’t working closely enough together. When you hear from Andy Burnham, the mayor of Greater Manchester, call for further devolution in England to make government more about place than party, to help deliver on improving skills and creating jobs as well as reviving the political culture in the country, you think he’s got a point. And the chancellor can make a start, simply by hosting a weekly meeting with the finance ministers of the three devolved nations and the metro mayors. More than that, he could build up a Business Sage, an advisory body that does what many in the economy want, namely give a real sense of the economic and social costs of the health advice from Sage itself.
5. Get out there. The chancellor has to communicate more. If there’s a lesson from the spring and the failure to roll out the CBILS – the Coronavirus Business Interruption Loan Scheme that promised so much and delivered slowly and such a fraction of what was promised – it’s that Rishi Sunak needs to be seen both to listen and talk more about what’s happening in the real economy. In these circumstances, people need to know that Mr Sunak sees the problems by describing them in particular and by name; that he both has answers to them and, just as importantly, acknowledges where things haven’t gone to plan; he has to inspire some confidence that he is looking beyond this week and next, that he’s got a plans for the longer term starting with a much more detailed account of what happens after 2 December. Once again, his furlough announcement to March means he has left the business world hanging: if the job retention scheme runs until the spring, will lockdowns roll on too? Much, much more frequent communication by the chancellor is not easy. He’d have to talk about work in progress and recognise where it’s not working. But regular economic and business briefings from the chancellor – not polemical speeches or defensive press conferences – would do a whole load more than a slick social media operation to convince people that Mr Sunak has a grip on what’s happening. In the coming months, the chancellor should hold two public briefings a week.
Politics is at work here, of course. When I recorded the Hopeful Chancellor podcast in the early summer, it was hard to get anyone to question Rishi Sunak’s first few months in the job. Even Labour ministers were shy of criticising him personally. That’s changed. On Monday morning, Sir Keir Starmer came in for the CBI annual conference. The Labour leader’s aim was to land the message that the party is under new management and open to business. But it was striking that his response to Boris Johnson’s announcement at the weekend that England would, after all, go back into a national lockdown, was to take a swing at Mr Sunak, particularly the decision to delay going to a national lockdown: “Make no mistake,” Keir Starmer said, “the chancellor’s name is all over this.”
The truth is that Covid-19 has its name all over this. Mr Sunak’s job is to work out what comes next.