How to make sense of Sunak's plans? They're about politics, not the economy | Aditya Chakrabortty

Combining pay freezes with levelling up, the chancellor seems intent on cementing the deal that gave Johnson his landslide

Pick a Labour chancellor, any Labour chancellor, from Stafford Cripps to Alistair Darling. Now imagine the jeers, the jibes, the public derision they would endure after confessing in parliament to racking up a budget deficit of almost £400bn, total debt of more than £2tn and the sharpest dive in GDP in three centuries; they would be exiled to some speck in a faraway sea. Yet this afternoon Conservative Rishi Sunak, who only moved into No 11 in February, did all that, warned of “an economic emergency”, and still made it look like a not utterly awful day at the office.

This must be what they mean by the “natural party of government”.

Put some of this sanguinity down to voters feeling zeroed out, after hundreds of billions have been poured into everything from hospital gowns to private-sector workers’ salaries. Also take a minute to appreciate just how much ducking and diving went into this afternoon’s display: a spending review for only one year, rightly putting off tough choices for a less volatile time, yet still speckled with gold dust for the rest of this parliament. Despite what you may have heard Tories say over the past decade, less money can now magically become more stuff: more bridges, more police officers, more nurses at more hospitals! And more headlines drip-fed to the press for days on end.

The Treasury harbours no magicians, of course; just officials crossing their fingers and hoping for the best. Still, the big message they and their political masters want you to take from today is that the economy is in a deep hole, but that Boris Johnson has a plan to get us out.

That story is simple and easy to swallow ­– and wrong. It treats this depression as a natural disaster, and ignores how this government so badly bungled its response to the pandemic that it is presiding over not only one of the highest death tolls in Europe but also one of the worst economic performances. It makes no reference to the Tory wrangling over Brexit – which, amazingly, Sunak didn’t mention, even though it has killed business investment almost stone dead since 2016. And it overlooks how whole swaths of society and business will still be dealing with the effects of Covid long after the vaccines have been dispensed.

Much of this is down to the British model of doing business, which relies on low overheads for staff and financial chicanery to extract profits. That is a large part of why many of our high streets will remain pockmarked by closures, while a welter of care homes will now close. Then there is the long-term damage to children’s education and the now swelling numbers of youth unemployment. Think, too, of the Office for Budget Responsibility’s warning that the British economy will still be smaller in five years’ time than it was forecast to be in March. The unavoidable conclusion is that we are in for the national equivalent of long Covid.

Very little announced in this statement will help with any of this. For all Johnson’s talk of levelling up, what the hardest-hit areas need right now is not some blond mop under a hard hat mugging for the cameras, nor civil servants uprooted from Whitehall, and certainly not low-tax, light-touch freeports ­– but cash in people’s pockets and decent public services. Instead, teachers and firefighters and millions of public sector workers have been slapped with an effective pay cut that will leave them earning less in real terms in 2021 than they were in 2010, local councils will continue to be starved of cash and, shamefully, those on universal credit face a benefits cut next spring.

Illustration by Ben Jennings.
Illustration by Ben Jennings Illustration: Ben Jennings/The Guardian

But step back, and something remarkable emerges from Sunak’s programme. For all its initial lethal complacency over Covid, the months of out-and-out incompetence and cronyism and today’s bleak talk, Downing Street seems now through the most acute part of the crisis. The next few months promise the coming of vaccines, and with them a private sector returning slowly to business as normal. As the Treasury points out, British households have stashed a lot of cash over the pandemic ­– money that is likely to get spent over coming months. Compared with the enforced standstill of 2020, next year could feel like a mini-boom for those households who have held on to their jobs and those consumer businesses still standing. It promises to be a remarkable spectacle, underlining how much further inequality has grown during the pandemic.

And for all the speculation, Sunak is not planning a rerun of George Osborne’s scorched-earth austerity. There will still be cuts targeted at local government, and day-to-day budgets across Whitehall departments look likely to be squeezed, but infrastructure spending will grow alongside the number of services Johnson wants to protect.

Nor will the Treasury go in for major tax-raising, since the Conservatives’ last manifesto promised to steer clear of the big money-spinners of income tax, VAT or national insurance. That leaves taxes on the wealthy such as capital gains ­– and Sunak will not want to jack up those too far for fear of antagonising the Tory base.

What lies ahead is a very British muddle. Austerity will be the pantomime villain of the next five years, forever waiting in the wings to be called on by the right or the press – and yet warded off by Sunak and Johnson. The country will keep on borrowing big amounts all the way through the first half of this decade. The great dirty secret of British politics is that, despite all the appeals to “prudence”, no government has run a budget surplus since the dotcom boom, right at the start of the millennium. Over the decades I have been writing about economics, government after government has kidded itself it can turbo-charge growth and pay down the deficit. This is the stuff of fantasy.

So it will remain this parliament. The Conservative chancellor who began his parliamentary career in 2015 stating that “in normal times, public spending should not exceed 37% of GDP” has instead pushed it up to nearly 60%. This is a strange and messy spot for a Tory government to end up in. As the Covid debacle proves, Johnsonism is a useless strategy for government. It is, however, a formidable strategy for electioneering, and this administration will spend the next four years in election mode, spending on its new voters in the north while appeasing its core voters in the south with low taxes. Money will be snatched from projects that don’t focus-group well, such as overseas aid, and funnelled into “levelling-up” schemes really designed to buy marginal seats

In 1987, straight after Margaret Thatcher won her third election, the theorist Stuart Hall wrote: “Politics does not reflect majorities, it constructs them.” This is how tax and spend will be used over the next few years: to cement the precarious new coalition of voters that gave Johnson his landslide last December, and secure him another big win in 2024.

  • Aditya Chakrabortty is a Guardian columnist and senior economics commentator

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Aditya Chakrabortty

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