Conservative leaders have traditionally been in favour of low taxes and spending – but not Boris Johnson. How will he and his Chancellor Rishi Sunak sort out their differences?
James Harding, narrating:
Hello, I’m James and this is the Sensemaker.
One story everyday to make sense of the world.
I’m the editor and co-founder of Tortoise, where we make this podcast, and I’m the host of one of our other podcasts too, ThinkIn with James Harding. It’s a series where we try to understand some of the biggest challenges of the 21st century. In this case, the China problem, or the power of tech companies.
As we come to the end of the year, we’re going to try and do something different in Sensemaker. We’re trying to understand those people who, in one way or another, can help us make better sense of what happened in 2021.
Today, the bloke next door; the man at No. 11 that they’re watching warily in No. 10 Downing Street: Rishi Sunak, the UK’s Chancellor of the Exchequer.
“It’s six minutes past five in the morning and we are now in a position to say that this election of 2019, formerly, has been won by the Conservatives, they’re now on 327 seats, it is 326 on the finishing line…”BBC News
The fall of the so-called red wall – i.e. traditionally Labour seats in the North – to the Tory party in the 2019 election changed the political calculation for the Conservatives.
And not long after the election, Boris Johnson appointed Rishi Sunak as Chancellor.
Sunak was already a rising star. Immaculately dressed, consistently pro-Brexit and, from a young age, an orthodox Conservative in the spirit of Margaret Thatcher. He favoured lower taxes, a smaller state and a thriving marketplace for private capital and free enterprise.
But within weeks of moving into No. 11 Downing Street, Covid-19 had struck. His low spending conservatism was one of the first victims of the pandemic. He spent public money like no Conservative Chancellor had ever spent before.
“Today I am making available an additional £330 billion of guarantees, equivalent to 15 percent of our GDP, that means any business who needs access to cash…”Rishi Sunak speaking in parliament
Rishi Sunak poured money into furlough schemes and business loans. The nightmare scenario of a plummeting economy and soaring unemployment was avoided. To fund it all, the Government borrowed over £300 billion – a record in peacetime.
“I think no one can accuse me or the government of being dogmatic or not wanting to support people given the actions we’ve taken over the past year and a half…”Rishi Sunak speaking on ITV’s Good Morning Britain
In 2020, Sunak’s pandemic spending splurge had helped to make him one of the best known and most respected politicians in Government.
He’d enjoyed being “Dishi Rishi” during the early stages of the pandemic through his “eat out to help out”…
“… for the month of August we will give everyone in the country an eat out to help out discount. Meals eaten at any participating business Monday to Wednesday will be 50 percent off…Rishi Sunak speaking in parliament
… and saving millions of jobs.
“For the first time in our history, the government is going to step in and help to pay people’s wages, we’re setting up a new coronavirus job retention scheme…”Rishi Sunak delivering a press conference
And, if that weren’t enough to warm British hearts, Nova, his new Labrador retriever, took up residence at Number 11 earlier this year. By the time of the Budget, Rishi Sunak’s polished social media operation had pictures of him cuddling his dog while working over drafts of his economic plan. He was – he is – a contender to lead the country.
But it would be a mistake to think that it’s just Covid that explains Rishi Sunak’s change in direction.
Because, in 2021, the Conservative government faced choices. Choices about the future of care, the future of climate change, the future shape of the country. Choices that cut to the question of what it is today to be a modern Conservative, between Boris Johnson’s agenda and Margaret Thatcher’s record. And so what did Rishi Sunak choose?
So, when it came to the Autumn Budget, what happened? Well, in 2021, the Conservatives became the party of bigger government. A tax increase to pay for social care and the NHS. Further spending commitments and a new regulatory agenda to meet the climate emergency. A series of unprecedented bills to fund infrastructure investment and levelling up.
As a result, more spending and higher taxes. Taxes up to the highest level since the 1950s; government spending to the highest level since the 1970s. The government has put up the minimum wage, more pay hikes are coming and there are growing worries of inflation – prices rising at a rate we haven’t seen for 30 or more years.
To many, Rishi Sunak’s choices were not his own; he was doing his master’s bidding.
Rishi Sunak had served up what Boris Johnson had ordered…
“Today’s budget increases total departmental spending over this parliament by £150 billion. That’s the largest increase this century with spending growing by 3.8 percent a year in real terms…”Rishi Sunak delivering the Autumn Budget, 2021
To others, Rishi Sunak’s Budget was a different kind of political choice. It was all part of his eventual bid for party leadership.
And some see a more seismic political shift: a move on the Right to the Left. Governments, not only in the UK, finding that they have to abandon their small state preferences and spend more on an ageing population, the climate transition and tackling inequality. Rishi Sunak not so much the agent of big changes, but the symptom of them.
It’s not, though, over yet. Rishi Sunak has ended 2021 promising for a return to old school Conservatism at some point in the future. Lower taxes, less spending. If not 2022, then perhaps 2023. Or maybe 2024.
In the final few moments of delivering his budget, he offered Conservatives some traditional comfort food:
“But as we look towards the future, I want to say this simple thing to the House and the British people… my goal is to reduce taxes, by the end of this Parliament, I want taxes to be going down, not up…”Rishi Sunak delivering the Autumn Budget, 2021
He was – he seemed to be assuring himself as much as his party, a tax-cutting Tory. But by then, the uneasy alliance of Boris Johnson and Rishi Sunak had, already, shifted economic Conservatism firmly to the Left.
Today’s episode was written by James Harding and Imy Harper, and produced by Studio Klong.
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