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The Treasury’s head boy

The Treasury’s head boy

In his stewardship of the Treasury, Rishi Sunak is acting like a head boy, not a leader. He’s unwilling to stand up to a fiscal orthodoxy that stands in the way of remaking Britain.


Earlier this week, I was talking to a cabinet minister about Rishi Sunak, the UK’s chancellor.  Surely, I asked him, now’s the time – on the back of the pandemic, in the face of war in Ukraine, squaring up to climate change and tackling long-term inequality in the UK – surely now’s the time to increase debt to do the things the Government says it wants to do. 

“Of course, it is.  Of course,” he said to me.  And then, rather surprisingly, he offered not a political defence of Sunak’s economic policy, but a psychological explanation. The Chancellor, more than any Chancellor he can remember, he said, has been captured by the Treasury. And this is because Rishi is head boy.  He was head boy at his prep school; head boy at Winchester.  And he wants to be head boy at the Treasury too. Every place he’s been, he said, he has whole-heartedly taken on the garb of the institution. And as a result, it was suggested, he’s got the job of the Chancellor the wrong way round: rather than getting the Prime Minister’s agenda through the Treasury, he presents the Treasury’s priorities to No. 10.   

I’m James Harding, I’m the editor and co-founder of Tortoise, and in this Editor’s Voicemail, I want to talk about Chancellor Rishi Sunak’s difficult week in contrast with exciting hour in our newsroom with LSE Director Minouche Shafik. She lifted my spirits. They were lifted at the thought of what is possible. In other words, after another week of doomscrolling depressing news, I’d like to stand back and look beyond the fast news to the slow news, to understand the story and scandal that’s flared up around the Chancellor in the context of the big changes that we need as a country.  

In the middle of the week as you probably know by now, the Independent broke the news that Akshata Murty, the Chancellor’s wife and the heiress to a £700 million fortune in Infosys shares, was a non-dom – i.e. that she uses a provision in the law to pay tax only on UK income, not the international income in dividends from her shareholding. 

This is, of course, a scandal.  Being a non-dom, is a choice: you have to pay £30,000 a year for the privilege of non-dom status and, in the process, declare that another country is your real domicile and that you are intending to return there. The Chancellor’s wife in an Indian citizen. Her non-dom status, then, suggests one of three things: either Mr Sunak and his wife are planning at some point in the next few years to move to India; or the Chancellor’s wife herself is planning to move to India and they intend to live separately; or, third, they’re not being entirely honest.  

Rishi Sunak’s response this week has been reflexively defensive. Akshata Murty put out a misleading statement saying that she’s an Indian citizen and, therefore, taken up non-dom status, as if she had no choice in the matter.  That compounded the problem, because it’s not true.  After that, Sunak’s aides attacked his attackers, briefing out that he’s the victim of a political hit job. Behind the scenes, the Chancellor is said to be taking it personally and, quite understandably, said to be fuming that his wife has been dragged into the personal smears of political life. 

It all made me think of that amateur analysis I’d heard earlier in the week about Rishi Sunak as head boy.  Now the man, who in his school days had been chosen for particular praise, popular with the boys and picked out for a position of largely ceremonial leadership by the teachers, finding himself shocked and bewildered as he weathers criticism from all sides.  

Because Mr Sunak’s stock has sunk fast since the Spring Statement.  It was then that he set out the Treasury’s plans for continued tax rises in the teeth of a cost of living crisis; that he did little to help families dealing with soaring energy bills; and he seemed to stand in the way of Govenment promises for levelling up, investing in education, further increases in defence spending and significant new infrastructure projects. Fellow cabinet ministers are seething that the Treasury, more than ever, is the Ministry of No. And this is because Rishi Sunak fits into the Treasury all too well: he’s now as orthodox perhaps even more so that they are, on reducing debt and limiting spending.  

Just 10 weeks ago, Rishi Sunak looked like he might be Prime Minister by Easter. Now, one Conservative MP told me, he’d be lucky if it’s 2035.  But there’s more to this than political noise.  More at stake than another case of Westminster building ’em up to knock ’em down, or the Lobby journalists’ infatuation with talent before they turn on it, tall poppy syndrome etc.  

The real charge sheet against Rishi Sunak is that he is acting like a head boy, not a leader.  His stewardship of the Treasury – and with it the British government – does not meet the demands of our times.

Because the world is changing fundamentally.   In the last 15 years consider: 2008, the financial crisis. 2016, Brexit and Trump. 2022, the invasion of Ukraine. In that time, the assumptions underpinning the market economy, democratic politics and the international order have been blown apart. 

And meanwhile, the creep of demographic, technological, environmental change has accelerated.  The old outnumber the young; almost everything is now digital; and the temperature is rising.  

Minouche Shafik, the director of the London School of Economics, came to our newsroom on Thursday evening for a ThinkIn to discuss how we respond to a world in which, to quote as she does the poet W. B. Yeats, “things fall apart”.   

Her book – What we owe each other – is a rarity.  It’s not just a diagnosis of the problem, but a prescription of a new social contract that rebuilds society.  It’s a book that does what Matthew Barzun, chairman and co-founder of Tortoise, says slow journalism should really be about – not ending it, not defending it, but mending it. 

And her thinking is not theoretical, it’s practical.  People deserve a decent, dignified life, safe in the knowledge that they have:

One, a minimum income – not a universal basic income, but a minimum floor secured by targeted taxes, tax credits and income top ups.

Two, an educational entitlement – for example she suggsets a £30,000 fund for every 18 year-old to spend over the course of their lifetime on education

Third, a basic health-care package – and she talks through a sensible rationing of healthcare resources to meet rising expectations of health in longer lives.

And fourth she says protection from poverty for the elderly – people working longer, so pensions start later but the pots are going to be bigger. 

Not everyone will agree with Minouche Shafik’s thinking, but these are concrete ideas – ideas, as an editor of mine at the FT used to say, that you can drop on your foot. 

And they are also ideas – investments in the future – that she can see how to pay for.  In a country like the UK at a time when, even if interest rates rise, debt servicing costs are still at historic lows, the Government can afford to borrow more.  Much more.  We don’t need to be stuck with Government borrowing at 100 per cent of GDP; we can raise it, she says, to easily over 120 per cent. And that might be a lot in normal times but these of course are not normal times. And, she adds, putting more money for more people into education will, over time, deliver a higher growth rate, more tax receipts and pay back. 

And likewise, she says, we don’t need to be stuck in a 20th century straitjacket on taxes to fund the 21st century.  She argues for two new taxes to help fund the future: a carbon tax; and a property tax.  The carbon tax, for obvious reasons.  And a property tax because, while inheritance, dividend and wealth taxes are easy for rich people with good accountants to avoid, houses and land are harder to move offshore. 

But that is where the slow news and the fast collide. Rishi Sunak’s wife’s non-dom status is clearly wrong; they can afford to fix it and they should.  That’s this week’s story and, no doubt, next week’s too. But let’s not lose sight of the story of the decade. The price that Britain is paying is not the likes of £30,000 for a non-dom declaration over £4 million a year in taxes on her international income that’s been lost to the Treasury. The price of this Chancellor continues to be much, much greater than that: it’s billions. Billions in underinvestment in society and individual potential in the UK, because Mr Sunak is unwilling and unable to stand up to an out-dated fiscal orthodoxy at the Treasury that fears debt, tinkers with taxes and stands in the way of remaking Britain. 

Things fall apart. But, when you listen to someone like Minouche Shafik, you realise we can put them back together again. We can mend it. To do that, we need to make choices, real and big ones. More debt; different taxes; a renewed social contract. It’s not impossible to make Britain healthier, happier and more successful in the 21st century.