Showing posts with label Sunak. Show all posts
Showing posts with label Sunak. Show all posts
Sunday 11 February 2024
Tuesday 1 November 2022
Sunday 30 October 2022
An MBA becomes PM, when the value of an MBA is questioned
Stephen Chambers in The FT
Rishi Sunak is the first person of colour to become UK prime minister, the first Hindu and the richest premier in modern times. He is also, significantly, the first to hold an MBA degree.
Sunak studied philosophy, politics and economics at Oxford, as so many leading British politicians have. But it is his time at Stanford’s Graduate School of Business — where he met his wife and was drilled in the finer points of competitive advantage and the capital asset pricing model — that sets him apart from his peers.
Stanford Graduate School of Business sits at the heart of Silicon Valley, where Romanesque architecture, sunshine and social liberalism combine with libertarian and free market ideas and a core belief in the redeeming power of technology. It spans both suit-and-tie corporatism and T-shirt-and-sandal activism. Venture enthusiasm and techno-utopianism make for a heady business school environment. Two years in brutally competitive Palo Alto changes more than how people dress.
Amid the Rodin sculptures on campus, Sunak will have absorbed Milton Friedman’s doctrine of shareholder primacy, Michael Porter’s “five forces” framework for understanding how industries work, so-called Monte Carlo simulations, the innovator’s dilemma and an emphasis on spreadsheets — all of it flavoured with Silicon Valley’s distinctive “move fast and break things” worldview. He graduated in 2006, the year Twitter was founded. The financial crisis hadn’t happened so MBAs had not yet been blamed for causing it. This was also the founding year of TOMS shoes, which gave away one pair of shoes to a child in need for every pair bought, the very model of the Silicon Valley social enterprise.
The MBA has arguably been the most influential degree of the last 50 years. It has brought systematic discipline to practices that were previously ad hoc and weakly formalised, and serious analytical rigour to bear on starting, funding, running and advising businesses. It built a bridge between research in disparate disciplines and gave us a framework for talking about companies, competition, innovation and investment.
But recently MBA influence has shown signs of waning. The traditionally high return on investment for the roughly quarter of a million students enrolled globally on such programmes is facing renewed scrutiny in the face of rising tuition fees, while those running the programmes have started to question their methods. What if shareholders aren’t the only people we should care about? What if markets don’t allocate resources optimally for social justice? What if the firm isn’t the most useful unit of analysis for getting things done? What if political reality isn’t captured or expressed by a spreadsheet?
What does it mean to have an MBA as prime minister? Sunak’s Stanford education means he can run the numbers and pitch the vision. He can assess the net present value. He understands organisational behaviour and market-segmentation. But will any of this help when the rational expectations of MBA orthodoxy collide with politics and events?
In his political career to date, Sunak has shown both TOMS shoes and Friedmanite instincts. The UK’s furlough scheme and “eat out to help out”, which he introduced as chancellor under Boris Johnson, were TOMS-ish, almost Keynesian. The austerity measures he is now contemplating suggest the opposite. And MBAs are very good at cutting costs. The economist Daron Acemoglu has suggested that employees in companies run by MBA graduates see their wages fall over a five-year period. Markets and owners like this. Employees probably don’t.
Having an MBA in charge is reassuring if we think of the nation as a corporation. But critics of these programmes point to overconfidence, ethical lapses and a lack of real analytical or empirical evidence for widely adopted strategies. They bemoan an undue focus on case study learning, a lack of emphasis on softer skills, overreliance on corporate acquisitions rather than productivity improvements and a narrow focus on shareholder value.
Business school admissions departments often say that their students are either “poets” or “quants”. Poets are usually humanities trained and uncomfortable with spreadsheets and valuation exercises. Quants are highly numerate, often with first degrees in engineering. Poets are comfortable with what Keats called “uncertainties, mysteries [and] doubts”. Quants are good at regression analysis. Poets sing, while quants count. Boris Johnson was a poet with a classics degree. He campaigned in poetry, and tried to govern in poetry as well. The UK’s new prime minister can clearly count, while his campaigning was done almost entirely in prose. But does Sunak’s MBA allow him to sing too?
Wednesday 26 October 2022
Rishi Sunak’s first job? Clearing up his own mess
A clever man, with a penchant for bad ideas writes The Economist
Rishi sunak entered Downing Street clutching an invisible dustpan and broom. “Mistakes were made,” declared the new prime minister on October 25th, all but rolling up his sleeves. “I have been elected as leader of my party…to fix them.” The voice was passive but the identity of the culprit was clear—Liz Truss, Mr Sunak’s hapless predecessor, who managed just 49 days in the job. It is the morning after the night before in the Conservative Party. The grown-ups have returned to find the house has been trashed. Now Mr Sunak must start the clean-up.
There is just one problem with this narrative. Mr Sunak is a cause of the problem as well as the solution. The new prime minister is helping tidy up a mess that he helped create.
When the Conservative Party has erred in recent years, Mr Sunak has nearly always been in favour of the mistake rather than the fix. There were many reasons to support Britain leaving the eu. Mr Sunak, however, picked the worst one: he thought it was a cracking idea. Britain will be “freer, fairer and more prosperous outside,” wrote Mr Sunak in 2016. It was a pragmatic decision, not a romantic one. The fundamental problem at the heart of his own government will be a policy for which he long campaigned. Likewise, Mr Sunak was comfortable with a “no deal” Brexit so long as Britain actually left the eu. Mr Sunak has pledged a more constructive relationship with the bloc. Better not to have broken it at all.
After the referendum triggered three years of political deadlock, Mr Sunak supported an extraordinary solution to the mess: Boris Johnson. That decision can be put down to cynicism. Mr Johnson was likely to win regardless of whether he was endorsed by Mr Sunak, at the time a junior minister in the department for local government. But intellectual contortions were required to join the bandwagon. Theresa May was competent and diligent yet also a total failure, ran Mr Sunak’s logic, so it did not matter that Mr Johnson was neither competent nor diligent. In July Mr Sunak resigned from his position as chancellor of the exchequer, prompting a cascade of ministerial departures that ended Mr Johnson’s reign. But why put him in Downing Street in the first place?
Mr Sunak embodies the tension between the Tories’ lust for low taxes and their habit of making big-state promises. Colossal spending programmes during the pandemic made Mr Sunak briefly the most popular politician in the country. Yet these were also the decisions he most resented; he tried to curtail schemes such as furlough prematurely in a bid to save cash. In the spring of this year, Mr Sunak similarly dragged his feet on offering support for ballooning energy bills. He is, at heart, a small-state Conservative, even if he has showed a commendable ability to overcome his natural instincts when urgent need arises.
If fiscal conservatism comes first for Mr Sunak, what comes after is much more erratic. As an ambitious backbencher Mr Sunak supported low-tax “freeports”, which shuffle economic activity around rather than generating it. As chancellor Mr Sunak championed the “Eat Out to Help Out” scheme, when the government in effect paid unvaccinated people to sit together during a pandemic and infect each other. Mr Sunak pushed the Royal Mint to issue a non-fungible token this summer, just as the market for these digital assets crashed. Support for quixotic policy is the norm for Mr Sunak rather than the exception.
In politics, however, luck sometimes masquerades as judgment. Losing the leadership contest to Ms Truss this summer was a big stroke of fortune. During that campaign Mr Sunak predicted that Ms Truss would be a disaster, and she was. He warned that reckless spending commitments would force mortgage rates higher; his campaign team even put together a calculator, pointing out the high bills that would hit households if rates hit even 5%. Yet mortgage rates were heading up regardless of Ms Truss’s rash budget. Her errors have obscured the fact that, had Mr Sunak won in the summer, rising interest rates would have left him with tricky questions to answer. Instead he can pin it all on Ms Truss.
During the summer campaign, and throughout his time on the front benches, Mr Sunak has taken a path long followed by the Conservative Party, which has governed in its narrow political interest rather than the national one. Pledges to curtail onshore wind and solar development please a few zealots but make it harder for Britain to reach its climate goals. Slashing fuel duty as chancellor provided a few days of positive headlines, but failed to put much money in people’s pockets and did not help the environment. There is little evidence that Mr Sunak will take on the vested interests, often in his own party, that hold back Britain’s economy.
Standing on the shoulders of dwarves
The prime minister is a cut above most of his peers. But this is as much a function of a Conservative civil war that killed off competent colleagues as Mr Sunak’s own talents. Elected only in 2015, Mr Sunak has not been doing the job very long. Inexperience, even with copious intelligence, is always a problem. Yet the Conservative Party had nowhere else to turn. It would be comforting to think of Mr Sunak as a clever cynic, a gambler who bet big on Brexit and Mr Johnson and (with a helping hand from Ms Truss) became the youngest prime minister in two centuries. A more worrying analysis is that he is a bright and decent man with bad ideas.
On this reading Mr Sunak does not mark a change from the Tory policies that have left Britain in such a state. Rather he personifies them. The rot in the Conservative Party did not begin with Ms Truss. Britain’s departure from the eu, which Mr Sunak supported, is the thing that acts as a handbrake on the country’s economic prospects. Mr Johnson’s chaotic reign, which he also supported, caused even more ruin. It is the Conservative Party’s failure to take on its supporters that does so much damage to the country. Mr Sunak may be the only available man to fix the government’s errors. But he also helped make them.
Saturday 6 August 2022
The people about to choose Britain’s next prime minister
Despite rumours to the contrary, the Tory faithful are exactly what you might imagine writes The Economist
It might be a queue for Marylebone Cricket Club, or perhaps an upmarket prostate clinic. There is ample linen. There are panama hats and pink cheeks and pink trousers; there is white hair and bald heads and a lurking suspicion that someone in the vicinity might bear the title “Major”. There are few women. There is almost no one, except the staff, who is not white.
The identity of the Tory party membership is a matter of national importance. The contest between Rishi Sunak, a former chancellor of the exchequer, and Liz Truss, the foreign secretary, to become the leader of the Conservative Party will also decide Britain’s next prime minister. The franchise for this choice belongs to members of the Tory party, at least 160,000-odd of them. Probably. For no one can or will say how many Tory party members there actually are.
What is clear is that they are gathering. In Exeter and Eastbourne, in Cardiff and Cheltenham, Tories are mobilising to attend the hustings for their new leader. Go to these hustings and you can see them queuing, punctually, outside. Some say that the Tory faithful are not what you might think. The queues put paid to that idea: the Tories are precisely what you might think.
According to research from academics at Queen Mary University and Sussex University, 68% of Tory members are over 50; 96% are white; 21% belong to the National Trust or English Heritage; 66% are male (see chart). They are not quite as aristocratic as the panamas and perceptions might suggest: policemen and teachers are among those queuing to get into the hustings. Women are manifestly in the minority. Many are unwilling to speak to a journalist, scattering like startled fish when approached and proffering their husbands as spokesperson instead. The term “Tory wife” appears to be less misogyny than justifiable taxonomy.
Tories may be mockable. That does not mean that they are malignant (or that unusual for members of political parties; Labour’s are 93% white). It is a trope that deviancy lurks behind the upstanding Tory exterior. George Orwell wrote that for a murder to make a truly entertaining news story it should have been perpetrated by a pious Christian preacher or a “chairman of the local Conservative Party branch”. Edward Heath, a former Tory prime minister, felt his party consisted of “shits, bloody shits and fucking shits”.
But the mood at the hustings is benevolent. Mike Trevor, working at the Exeter event as a security guard (and one of the few non-white people there), considers the Tories a “very easy crowd”. Mr Trevor usually does arena concerts. Tories, he says, are “very nice” to deal with. Another guard pulls a face: some members had become stroppy when she took away their water bottles. In the queue, Tories—polite, if prone to the odd harrumph—shuffle forwards.
The hustings do reveal two misconceptions about the Tory party race. The first is the idea that it is about Mr Sunak and Ms Truss. There are, as it were, three of us in these hustings. Many members are there less to elect a new leader than to mourn their old one—and to berate his killer. As one Tory, a fan of Mr Sunak, regretfully observes, in the assassination of Boris Johnson Mr Sunak has been cast as Brutus. On this reading Mr Johnson’s fall was not caused by his own incompetence and duplicity; it was caused by Mr Sunak. It is notable that the largest cheer of the evening in Exeter comes when, during a montage film of past Tory highlights, Mr Johnson pops up celebrating his 2019 election victory. Banquo’s ghost rarely made a better entrance.
The other misconception involves a confusion over conjunctions. Ms Truss is currently well ahead of Mr Sunak—the favourite among mps and the public—in polling of Tory members. A recent YouGov poll put her support at 58%, and his at just 29%. Surveying such a small, opaque electorate is hard but commentators still wonder how, “despite” jibes that she is “bonkers” and a “human hand grenade”, this lead apparently yawns. Speak to Tories at the hustings and it is clear that with Ms Truss—as with Mr Johnson before her—the correct conjunction is not “despite” but “because”. Ms Truss may be “bonkers”, says Colin Trudgeon, a Tory member, but “I love a bit of bonkers. Boris…was nutty as a fruitcake.”
Inside the venues, preconceptions about the candidates are generally confirmed. Ms Truss is, as a now-famous clip in which she discussed British cheese made clear, a friend of the full stop. She peppers her speeches with them. Often even stopping. Midway through a sentence. For effect. She discusses emotive issues: Vladimir Putin, fishermen and proper crops. In our fields.
Mr Sunak, meanwhile, is a man who speaks in subclauses. Sentences and ideas accumulate; complexity is embraced; nuance noted. He discusses corporation tax with enthusiasm. Neither fully wows the audience. Afterwards, Tory members who speak to your correspondent consider that Mr Sunak was more “statesmanlike”. But inside it was Ms Truss’s pauses for which they whooped more.
It might be a queue for Marylebone Cricket Club, or perhaps an upmarket prostate clinic. There is ample linen. There are panama hats and pink cheeks and pink trousers; there is white hair and bald heads and a lurking suspicion that someone in the vicinity might bear the title “Major”. There are few women. There is almost no one, except the staff, who is not white.
The identity of the Tory party membership is a matter of national importance. The contest between Rishi Sunak, a former chancellor of the exchequer, and Liz Truss, the foreign secretary, to become the leader of the Conservative Party will also decide Britain’s next prime minister. The franchise for this choice belongs to members of the Tory party, at least 160,000-odd of them. Probably. For no one can or will say how many Tory party members there actually are.
What is clear is that they are gathering. In Exeter and Eastbourne, in Cardiff and Cheltenham, Tories are mobilising to attend the hustings for their new leader. Go to these hustings and you can see them queuing, punctually, outside. Some say that the Tory faithful are not what you might think. The queues put paid to that idea: the Tories are precisely what you might think.
According to research from academics at Queen Mary University and Sussex University, 68% of Tory members are over 50; 96% are white; 21% belong to the National Trust or English Heritage; 66% are male (see chart). They are not quite as aristocratic as the panamas and perceptions might suggest: policemen and teachers are among those queuing to get into the hustings. Women are manifestly in the minority. Many are unwilling to speak to a journalist, scattering like startled fish when approached and proffering their husbands as spokesperson instead. The term “Tory wife” appears to be less misogyny than justifiable taxonomy.
Tories may be mockable. That does not mean that they are malignant (or that unusual for members of political parties; Labour’s are 93% white). It is a trope that deviancy lurks behind the upstanding Tory exterior. George Orwell wrote that for a murder to make a truly entertaining news story it should have been perpetrated by a pious Christian preacher or a “chairman of the local Conservative Party branch”. Edward Heath, a former Tory prime minister, felt his party consisted of “shits, bloody shits and fucking shits”.
But the mood at the hustings is benevolent. Mike Trevor, working at the Exeter event as a security guard (and one of the few non-white people there), considers the Tories a “very easy crowd”. Mr Trevor usually does arena concerts. Tories, he says, are “very nice” to deal with. Another guard pulls a face: some members had become stroppy when she took away their water bottles. In the queue, Tories—polite, if prone to the odd harrumph—shuffle forwards.
The hustings do reveal two misconceptions about the Tory party race. The first is the idea that it is about Mr Sunak and Ms Truss. There are, as it were, three of us in these hustings. Many members are there less to elect a new leader than to mourn their old one—and to berate his killer. As one Tory, a fan of Mr Sunak, regretfully observes, in the assassination of Boris Johnson Mr Sunak has been cast as Brutus. On this reading Mr Johnson’s fall was not caused by his own incompetence and duplicity; it was caused by Mr Sunak. It is notable that the largest cheer of the evening in Exeter comes when, during a montage film of past Tory highlights, Mr Johnson pops up celebrating his 2019 election victory. Banquo’s ghost rarely made a better entrance.
The other misconception involves a confusion over conjunctions. Ms Truss is currently well ahead of Mr Sunak—the favourite among mps and the public—in polling of Tory members. A recent YouGov poll put her support at 58%, and his at just 29%. Surveying such a small, opaque electorate is hard but commentators still wonder how, “despite” jibes that she is “bonkers” and a “human hand grenade”, this lead apparently yawns. Speak to Tories at the hustings and it is clear that with Ms Truss—as with Mr Johnson before her—the correct conjunction is not “despite” but “because”. Ms Truss may be “bonkers”, says Colin Trudgeon, a Tory member, but “I love a bit of bonkers. Boris…was nutty as a fruitcake.”
Inside the venues, preconceptions about the candidates are generally confirmed. Ms Truss is, as a now-famous clip in which she discussed British cheese made clear, a friend of the full stop. She peppers her speeches with them. Often even stopping. Midway through a sentence. For effect. She discusses emotive issues: Vladimir Putin, fishermen and proper crops. In our fields.
Mr Sunak, meanwhile, is a man who speaks in subclauses. Sentences and ideas accumulate; complexity is embraced; nuance noted. He discusses corporation tax with enthusiasm. Neither fully wows the audience. Afterwards, Tory members who speak to your correspondent consider that Mr Sunak was more “statesmanlike”. But inside it was Ms Truss’s pauses for which they whooped more.
Friday 22 July 2022
Shapeshifter Liz Truss on a roll as version 3.0 hits Tory sweet spot
It’s exhausting, keeping up with her journey. It’s almost as if she doesn’t believe in anything at all writes John Crace in The Guardian
Listen to Liz Truss for long enough and she’ll tell you she’s been on a journey. The inexorable rise of a girl who went from a rough Leeds comprehensive to frontrunner for the next Conservative prime minister. Via a brief spell in the Lib Dems. We all make mistakes.
Examine the journey more carefully, though, and it begins to look even more remarkable. The human flotsam who just happens to be carried downstream to the doors of No 10. A journey without any ideas or purpose other than to adapt to her surroundings and rise to the top. The failures have been spectacular, yet also spectacularly successful. Each time, she emerges into a more powerful iteration. Samuel Beckett could only stand back and applaud. She is literally living his dream.
Take Version 1.0 of Radon Liz. She’s a gas, but she’s inert. This was back in the early days of David Cameron’s leadership. No one was more socially liberal than Truss. No one ever hugged a husky tighter. Or embraced austerity harder. As and when required.
This Liz was also an ardent remainer. I can remember meeting her in the spin room of a televised debate during the referendum campaign. She bent my ear at length about how Vote Leave was based on lies and that remain was going to win at a canter. No sweat. No bother. That was probably the first time I seriously entertained the idea that the UK was going to leave the EU. Her reward for failure was promotion.
Radon Liz 2.0 turned out to be a passionate leaver. Far more so than many people who had supported Brexit all along. It wasn’t that she now reckoned what was done was done, there was no going back and we just had to make the best of it. It was that remaining in the EU was wrong. A thought crime. A mortal sin. This was the Truss who draped herself in the union jack for photographs at every available opportunity. Who was never happier than when cosplaying Margaret Thatcher in a tank. While the economy also tanked. This version was also rewarded with ever more governmental baubles.
The newest version, Liz 3.0, is almost incomprehensible. She has slid so far through the looking-glass to the Tory right that in some parallel universes she appears to have adopted Marxist economics. Dialectics has never been so confusing. She both reveres Boris Johnson’s memory, saying she wouldn’t have changed a thing, yet trashes the record of the government. Her prescription for getting the economy back on track is to reverse the national insurance hikes and to cut personal and corporation tax. How she would do this, she hasn’t said. Right now it’s enough just to talk in riddles.
It is exhausting, though. To keep up with Radon Liz’s journey, you have to be able to run fast. She is the anti-ideologue. The anti-conviction politician. Not so much a set of ideas looking for their natural home as vaulting ambition in search of some ideas. Any ideas. If you don’t like hers, she’s got some others.
Because here’s the thing. Truss is a tabula rasa – a dodgy 1980s computer with a screen that is permanently buffering. Someone capable of reinventing herself almost at will. And it just so happens that every time she needs some new ideas, she comes up with a set that exactly mirrors those that are needed to enable her to rise still higher in the Tory party. It’s one hell of a coincidence. Imagine one person having that much luck. It’s almost as if she doesn’t believe in anything at all. The ultimate shapeshifter. “Tonight, Matthew, I will be whatever you want me to be.”
For reasons not entirely clear to anyone, Truss has struck paydirt with version 3.0. It’s all but a certainty that her journey is now complete. No one is yet calling the next seven weeks a pointless extended coronation, but we’re not far off that point. Radon Liz’s latest incarnation has hit the Tory members’ sweet spot. Partly by not being Rish! – there are plenty who will never forgive him for betraying the Convict – but mainly by telling them what they want to hear.
Were she a bit brighter, she too would be amazed that so many people could forget that Rish! didn’t increase public borrowing and increase taxes because he’s a socialist. He did so because the country was falling apart in a pandemic. But when you’re on a roll, you’re on a roll. And Liz is living her best life as the prime minister in waiting. So much so that she’s almost relaxed. As relaxed as AI gets.
Her interview with Nick Robinson on the Today programme passed off with few alarms. She even found her way into the building and navigated her way out without having to call security. A vast improvement on her launch event the previous week. And she even managed to talk the usual bollocks without sounding too robotic. Close your eyes and you could almost imagine she was human.
She knew her plan for unfunded tax cuts wasn’t inflationary because Patrick Minford had told her so. This was the economist who had forecast that Brexit would increase GDP by 7% and that food prices would fall. Bring on the Nobel prize.
Later on Thursday afternoon, Radon Liz was at Little Miracles, a charity for children with life-limiting and other disabilities, and looked quite at ease. She must have made countless visits like this as a constituency MP. She chatted to the kids for a while about the hassle of being followed around by the media. She looked pointedly at the collection of sketch writers. But there was kindness and laughter in her eyes. She can at least see the absurdity of someone like her becoming prime minister. And she does believe in a free press. Unlike Rish!.
Truss then moved on to the parents and listened as they shared their experiences. Afterwards, I asked two of them, Wendy and Brian – neither Tory voters – what they thought. Nice enough, they said. Though the proof would be in the delivery. If Truss were to spend proper money on social services, that would be a first.
By then Radon Liz had moved on. Just time to say she was all in favour of a new royal yacht, provided it was funded by Tesco, and that she was Labour’s worst nightmare. Wet dream more like. But she’s entitled to her delusions. And with that she was off. Job done. It had been the quintessential Liz experience. Charmingly superficial. Little Miracles would still be short of funds and the parents would still struggle to get the services their children needed. But more importantly, Truss would be in Downing Street. She left as she came. Without a trace. On brand to the last.
Listen to Liz Truss for long enough and she’ll tell you she’s been on a journey. The inexorable rise of a girl who went from a rough Leeds comprehensive to frontrunner for the next Conservative prime minister. Via a brief spell in the Lib Dems. We all make mistakes.
Examine the journey more carefully, though, and it begins to look even more remarkable. The human flotsam who just happens to be carried downstream to the doors of No 10. A journey without any ideas or purpose other than to adapt to her surroundings and rise to the top. The failures have been spectacular, yet also spectacularly successful. Each time, she emerges into a more powerful iteration. Samuel Beckett could only stand back and applaud. She is literally living his dream.
Take Version 1.0 of Radon Liz. She’s a gas, but she’s inert. This was back in the early days of David Cameron’s leadership. No one was more socially liberal than Truss. No one ever hugged a husky tighter. Or embraced austerity harder. As and when required.
This Liz was also an ardent remainer. I can remember meeting her in the spin room of a televised debate during the referendum campaign. She bent my ear at length about how Vote Leave was based on lies and that remain was going to win at a canter. No sweat. No bother. That was probably the first time I seriously entertained the idea that the UK was going to leave the EU. Her reward for failure was promotion.
Radon Liz 2.0 turned out to be a passionate leaver. Far more so than many people who had supported Brexit all along. It wasn’t that she now reckoned what was done was done, there was no going back and we just had to make the best of it. It was that remaining in the EU was wrong. A thought crime. A mortal sin. This was the Truss who draped herself in the union jack for photographs at every available opportunity. Who was never happier than when cosplaying Margaret Thatcher in a tank. While the economy also tanked. This version was also rewarded with ever more governmental baubles.
The newest version, Liz 3.0, is almost incomprehensible. She has slid so far through the looking-glass to the Tory right that in some parallel universes she appears to have adopted Marxist economics. Dialectics has never been so confusing. She both reveres Boris Johnson’s memory, saying she wouldn’t have changed a thing, yet trashes the record of the government. Her prescription for getting the economy back on track is to reverse the national insurance hikes and to cut personal and corporation tax. How she would do this, she hasn’t said. Right now it’s enough just to talk in riddles.
It is exhausting, though. To keep up with Radon Liz’s journey, you have to be able to run fast. She is the anti-ideologue. The anti-conviction politician. Not so much a set of ideas looking for their natural home as vaulting ambition in search of some ideas. Any ideas. If you don’t like hers, she’s got some others.
Because here’s the thing. Truss is a tabula rasa – a dodgy 1980s computer with a screen that is permanently buffering. Someone capable of reinventing herself almost at will. And it just so happens that every time she needs some new ideas, she comes up with a set that exactly mirrors those that are needed to enable her to rise still higher in the Tory party. It’s one hell of a coincidence. Imagine one person having that much luck. It’s almost as if she doesn’t believe in anything at all. The ultimate shapeshifter. “Tonight, Matthew, I will be whatever you want me to be.”
For reasons not entirely clear to anyone, Truss has struck paydirt with version 3.0. It’s all but a certainty that her journey is now complete. No one is yet calling the next seven weeks a pointless extended coronation, but we’re not far off that point. Radon Liz’s latest incarnation has hit the Tory members’ sweet spot. Partly by not being Rish! – there are plenty who will never forgive him for betraying the Convict – but mainly by telling them what they want to hear.
Were she a bit brighter, she too would be amazed that so many people could forget that Rish! didn’t increase public borrowing and increase taxes because he’s a socialist. He did so because the country was falling apart in a pandemic. But when you’re on a roll, you’re on a roll. And Liz is living her best life as the prime minister in waiting. So much so that she’s almost relaxed. As relaxed as AI gets.
Her interview with Nick Robinson on the Today programme passed off with few alarms. She even found her way into the building and navigated her way out without having to call security. A vast improvement on her launch event the previous week. And she even managed to talk the usual bollocks without sounding too robotic. Close your eyes and you could almost imagine she was human.
She knew her plan for unfunded tax cuts wasn’t inflationary because Patrick Minford had told her so. This was the economist who had forecast that Brexit would increase GDP by 7% and that food prices would fall. Bring on the Nobel prize.
Later on Thursday afternoon, Radon Liz was at Little Miracles, a charity for children with life-limiting and other disabilities, and looked quite at ease. She must have made countless visits like this as a constituency MP. She chatted to the kids for a while about the hassle of being followed around by the media. She looked pointedly at the collection of sketch writers. But there was kindness and laughter in her eyes. She can at least see the absurdity of someone like her becoming prime minister. And she does believe in a free press. Unlike Rish!.
Truss then moved on to the parents and listened as they shared their experiences. Afterwards, I asked two of them, Wendy and Brian – neither Tory voters – what they thought. Nice enough, they said. Though the proof would be in the delivery. If Truss were to spend proper money on social services, that would be a first.
By then Radon Liz had moved on. Just time to say she was all in favour of a new royal yacht, provided it was funded by Tesco, and that she was Labour’s worst nightmare. Wet dream more like. But she’s entitled to her delusions. And with that she was off. Job done. It had been the quintessential Liz experience. Charmingly superficial. Little Miracles would still be short of funds and the parents would still struggle to get the services their children needed. But more importantly, Truss would be in Downing Street. She left as she came. Without a trace. On brand to the last.
Thursday 20 May 2021
The secret of Johnson’s success lies in his break with Treasury dominance
Gordon Brown’s rule-based approach shaped Whitehall for two decades. But the Tories are forging a new politics that has little regard for prudence writes William Davies in The Guardian
Illustration: Eva Bee/The Guardian Thu 20 May 2021 07.00 BST
The Conservative party’s growing electoral dominance in non-metropolitan England, so starkly re-emphasised by results in the north-east, has been attributed to various causes. Brexit and the popularity of Boris Johnson both count for a great deal. But while Labour is busy telling voters how much it deserved to lose, this is only half the picture. A major part of Johnson’s appeal is the way he has escaped the shadow cast by one of Britain’s three most significant political figures of the past 45 years: not Margaret Thatcher or Tony Blair, but Gordon Brown.
The 1994 meeting between Blair and Brown at the Granita restaurant in Islington, north London, shortly after John Smith’s death, is the founding myth of New Labour: the moment when Brown agreed to let Blair stand for the leadership, on certain conditions. In addition to Blair’s much disputed commitment to serve only two terms in office should he become prime minister, there was also his promise that Brown, as chancellor, would get control over the domestic policy agenda. At least the second of these commitments was honoured, resulting in a situation where, from 1997 to 2007, the Treasury held an overwhelming dominance over the rest of Whitehall, while Brown was implicitly unsackable.
But, together with his adviser Ed Balls, Brown was also the architect of a new apparatus of economic policymaking designed for the era of globalisation. The central problem that Balls and Brown confronted was how to build the capacity for higher levels of social spending, while also retaining financial credibility in an age of far more mobile capital than any confronted by previous Labour governments. The fear was that, with financial capital able to cross borders at speed, a high-spending government might be viewed suspiciously by investors and lenders, making it harder for the state to borrow cheaply. The first part of their answer endures to this day: operational independence was handed to the Bank of England, accompanied by an inflation target. No longer could politicians seek to win elections by cutting interest rates, a move that aimed to win the trust of the markets.
On top of this, Brown also introduced a culture of almost obsessive fiscal discipline, as if the bond markets would attack the moment he showed any flexibility – the same paranoia that shaped Clintonism. His “golden rule”, outlined in his first budget, stated that, over the economic cycle, the government could borrow only to invest, not for day-to-day spending. The Treasury governed the rest of Whitehall according to a strict economic rubric, demanding every spending proposal was audited according to orthodox neoclassical economics.
Balls later wrote that their thinking had been guided by an influential 1977 article, Rules Rather than Discretion, in which two economists, Finn Kydland and Edward Prescott, sought to demonstrate that policymakers will produce far better economic outcomes if they stick rigidly to certain principles and heuristics of policy, rather than seeking to intervene on a case-by-case basis. Brown’s robotic persona and his mantra of “prudence” conveyed a programme that was so focused on policy as to be oblivious to more frivolous aspects of politics.
Elements of this Brownite machine remained in place during the David Cameron-George Osborne years: a chancellor acting as a kind of parallel prime minister, transforming society through force of cost-benefit analysis, only now the fiscal tide was going out rather than in. Even “Spreadsheet Phil” Hammond sustained the template as far as he could, in the face of ever-rising attacks from the Brexit extremists in his own party. The point is that, from 1997 to 2019, the government largely meant the Treasury. Those powers that are so foundational for the modern nation state – to tax, borrow and spend – were the basis on which governments asked to be judged, by voters and financial markets.
Various things have happened to weaken the Treasury’s political authority over the past five years, though – significantly – none of these has yet seemed to weaken the government’s credibility in the eyes of the markets. First, there was the notorious cooked Brexit forecast published in May 2016, predicting an immediate recession, half a million job losses and a house price crash, should Britain vote to leave. The referendum itself, a mass refusal to view the world in terms of macroeconomics, meant there could be no going back to a world in which politics was dominated by economists.
Consider how different things are now from in Brown’s heyday. Johnson’s first chancellor, Sajid Javid, lasted little more than six months in the job, resigning after one of his aides was sacked by Dominic Cummings without his knowledge. His second, Rishi Sunak, may have high political ambitions and approval ratings, but scarcely forms the kind of double-act with Johnson that Brown did with Blair, or Osborne with Cameron. Johnson’s cabinet is notable for lacking any obvious next-in-line leader.
What’s more interesting are the parts of Whitehall that have suddenly risen in profile under Johnson: communities and local government under Robert Jenrick, and the Department for Digital, Culture Media and Sport under Oliver Dowden. With the “levelling up” agenda of the former, (manifest in such pork barrel politics as the Towns Fund) and the “culture war” agenda of the latter (evident in attacks on the autonomy of museums), a new vision of government is emerging, one that is no longer afraid of expressing cultural favouritism or fixing deals. Balls and Brown were inspired by “rules rather than discretion”; now there’s no better way to sum up Jenrick’s disgraceful governmental career to date than “discretion rather than rules”.
In the background, of course, are the unique fiscal and financial circumstances produced by Covid, in which all notions of prudence have been thrown out of the window. With the Bank of England buying most of the additional government bonds issued over the last 15 months (beyond the wildest imaginings of Balls and Brown), and with the cost of borrowing close to zero, the rationale for strict fiscal discipline or austerity has currently evaporated. Paradoxically, a situation in which the Treasury can find an emergency £60bn to pay the country’s wages makes for a popular chancellor, but may make for a less powerful Treasury.
Amid all this, Labour is left in an unenviable position, which is in many ways deeply unfair. So long as the Tories are associated with Brexit, England and Johnson, the voters don’t expect them to exercise any kind of discipline, fiscal or otherwise. Meanwhile, Labour remains associated with a Treasury worldview: technocratic, London-centric, British not English, rules not discretion. What’s doubly unfair is that, thanks to the serial fictions of Osborne and the Tory press from 2010 onwards that Labour had “spent all the money”, it is not even viewed as economically trustworthy. In the end, it turned out that public perceptions of financial credibility were largely shaped by political messaging and media narratives, not by adherence to self-imposed fiscal rules.
In the eyes of party members, New Labour will be for ever tarred by Blair and Iraq. In the eyes of much of the country, however, it will be tarred by some vague memory of centralised Brownite spending regimes. The fact that Labour receives so little credit for Brown’s undoubted successes as a spending chancellor is due to many factors, but ultimately consists in the fact that the technocratic, Treasury view of the world was never adequately translated into a political story. Osborne simply presented himself as the inheritor of a centralised “mess” that needed cleaning up.
The recent elections demonstrated that all political momentum is now with the cities and nations of Britain: the Conservatives in leave-voting England, Andy Burnham in Manchester, the SNP in Scotland, Labour in Wales. Rather than making weak gestures towards the union jack or against London, Labour needs to think deeply about the kind of statecraft and policy style that is suited to such a moment, so as to finally leave the world of Granita and “golden rules” behind.
The Conservative party’s growing electoral dominance in non-metropolitan England, so starkly re-emphasised by results in the north-east, has been attributed to various causes. Brexit and the popularity of Boris Johnson both count for a great deal. But while Labour is busy telling voters how much it deserved to lose, this is only half the picture. A major part of Johnson’s appeal is the way he has escaped the shadow cast by one of Britain’s three most significant political figures of the past 45 years: not Margaret Thatcher or Tony Blair, but Gordon Brown.
The 1994 meeting between Blair and Brown at the Granita restaurant in Islington, north London, shortly after John Smith’s death, is the founding myth of New Labour: the moment when Brown agreed to let Blair stand for the leadership, on certain conditions. In addition to Blair’s much disputed commitment to serve only two terms in office should he become prime minister, there was also his promise that Brown, as chancellor, would get control over the domestic policy agenda. At least the second of these commitments was honoured, resulting in a situation where, from 1997 to 2007, the Treasury held an overwhelming dominance over the rest of Whitehall, while Brown was implicitly unsackable.
But, together with his adviser Ed Balls, Brown was also the architect of a new apparatus of economic policymaking designed for the era of globalisation. The central problem that Balls and Brown confronted was how to build the capacity for higher levels of social spending, while also retaining financial credibility in an age of far more mobile capital than any confronted by previous Labour governments. The fear was that, with financial capital able to cross borders at speed, a high-spending government might be viewed suspiciously by investors and lenders, making it harder for the state to borrow cheaply. The first part of their answer endures to this day: operational independence was handed to the Bank of England, accompanied by an inflation target. No longer could politicians seek to win elections by cutting interest rates, a move that aimed to win the trust of the markets.
On top of this, Brown also introduced a culture of almost obsessive fiscal discipline, as if the bond markets would attack the moment he showed any flexibility – the same paranoia that shaped Clintonism. His “golden rule”, outlined in his first budget, stated that, over the economic cycle, the government could borrow only to invest, not for day-to-day spending. The Treasury governed the rest of Whitehall according to a strict economic rubric, demanding every spending proposal was audited according to orthodox neoclassical economics.
Balls later wrote that their thinking had been guided by an influential 1977 article, Rules Rather than Discretion, in which two economists, Finn Kydland and Edward Prescott, sought to demonstrate that policymakers will produce far better economic outcomes if they stick rigidly to certain principles and heuristics of policy, rather than seeking to intervene on a case-by-case basis. Brown’s robotic persona and his mantra of “prudence” conveyed a programme that was so focused on policy as to be oblivious to more frivolous aspects of politics.
Elements of this Brownite machine remained in place during the David Cameron-George Osborne years: a chancellor acting as a kind of parallel prime minister, transforming society through force of cost-benefit analysis, only now the fiscal tide was going out rather than in. Even “Spreadsheet Phil” Hammond sustained the template as far as he could, in the face of ever-rising attacks from the Brexit extremists in his own party. The point is that, from 1997 to 2019, the government largely meant the Treasury. Those powers that are so foundational for the modern nation state – to tax, borrow and spend – were the basis on which governments asked to be judged, by voters and financial markets.
Various things have happened to weaken the Treasury’s political authority over the past five years, though – significantly – none of these has yet seemed to weaken the government’s credibility in the eyes of the markets. First, there was the notorious cooked Brexit forecast published in May 2016, predicting an immediate recession, half a million job losses and a house price crash, should Britain vote to leave. The referendum itself, a mass refusal to view the world in terms of macroeconomics, meant there could be no going back to a world in which politics was dominated by economists.
Consider how different things are now from in Brown’s heyday. Johnson’s first chancellor, Sajid Javid, lasted little more than six months in the job, resigning after one of his aides was sacked by Dominic Cummings without his knowledge. His second, Rishi Sunak, may have high political ambitions and approval ratings, but scarcely forms the kind of double-act with Johnson that Brown did with Blair, or Osborne with Cameron. Johnson’s cabinet is notable for lacking any obvious next-in-line leader.
What’s more interesting are the parts of Whitehall that have suddenly risen in profile under Johnson: communities and local government under Robert Jenrick, and the Department for Digital, Culture Media and Sport under Oliver Dowden. With the “levelling up” agenda of the former, (manifest in such pork barrel politics as the Towns Fund) and the “culture war” agenda of the latter (evident in attacks on the autonomy of museums), a new vision of government is emerging, one that is no longer afraid of expressing cultural favouritism or fixing deals. Balls and Brown were inspired by “rules rather than discretion”; now there’s no better way to sum up Jenrick’s disgraceful governmental career to date than “discretion rather than rules”.
In the background, of course, are the unique fiscal and financial circumstances produced by Covid, in which all notions of prudence have been thrown out of the window. With the Bank of England buying most of the additional government bonds issued over the last 15 months (beyond the wildest imaginings of Balls and Brown), and with the cost of borrowing close to zero, the rationale for strict fiscal discipline or austerity has currently evaporated. Paradoxically, a situation in which the Treasury can find an emergency £60bn to pay the country’s wages makes for a popular chancellor, but may make for a less powerful Treasury.
Amid all this, Labour is left in an unenviable position, which is in many ways deeply unfair. So long as the Tories are associated with Brexit, England and Johnson, the voters don’t expect them to exercise any kind of discipline, fiscal or otherwise. Meanwhile, Labour remains associated with a Treasury worldview: technocratic, London-centric, British not English, rules not discretion. What’s doubly unfair is that, thanks to the serial fictions of Osborne and the Tory press from 2010 onwards that Labour had “spent all the money”, it is not even viewed as economically trustworthy. In the end, it turned out that public perceptions of financial credibility were largely shaped by political messaging and media narratives, not by adherence to self-imposed fiscal rules.
In the eyes of party members, New Labour will be for ever tarred by Blair and Iraq. In the eyes of much of the country, however, it will be tarred by some vague memory of centralised Brownite spending regimes. The fact that Labour receives so little credit for Brown’s undoubted successes as a spending chancellor is due to many factors, but ultimately consists in the fact that the technocratic, Treasury view of the world was never adequately translated into a political story. Osborne simply presented himself as the inheritor of a centralised “mess” that needed cleaning up.
The recent elections demonstrated that all political momentum is now with the cities and nations of Britain: the Conservatives in leave-voting England, Andy Burnham in Manchester, the SNP in Scotland, Labour in Wales. Rather than making weak gestures towards the union jack or against London, Labour needs to think deeply about the kind of statecraft and policy style that is suited to such a moment, so as to finally leave the world of Granita and “golden rules” behind.
Friday 10 April 2020
Britain and Covid-19
by Giffenman
This is an unusual time for the whole world as it deals with
the Corona
The Corona pandemic has laid
bare the unpreparedness of the UK
Boris Johnson, the British Prime Minister, did not want the UK to respond like China ,
Korea or Germany Corona
The biggest surprise in this period has been the behaviour
of the chancellor Rishi Sunak. He has, in the past few days, made unlimited
funds available for the nation to cope with the health and economic impact of
the pandemic. This is in sharp contrast to the austerity agenda in vogue since
2010. Sunak’s popularity has shot up among the public and he is being touted as
a replacement for the currently invalid Prime Minister.
Even more surprising is the behaviour of the czars of the independent
Bank of England (BOE). In synchronised operations with Rishi Sunak they slashed
interest rates to 0.1% and agreed to borrow large amounts to kick-start the
economy. Then a couple of days ago, they even abandoned their orthodox ideology
on borrowings via gilts and decided to create money out of thin air to help the
government deal with the crisis. The BOE even surprised itself when it stopped
commercial banks from paying dividends to their shareholders.
If the financial and economic arm of the government is
taking such unorthodox and knee-jerk measures in a concerted manner one does
not need much imagination to imagine what might be their prognoses for the UK
Sunday 22 March 2020
Wartime finance fit for wartime economic conditions. Sunak as British Prime Minister?
Rishi Sunak’s coronavirus rescue package is crucial for a collapsing economy. Social partnership is back writes Will Hutton in The Guardian
Food queues at Covent Garden market in London during the Second World War. Photograph: Trinity Mirror/Mirrorpix/Alamy Stock Photo
Last week, the British economic and financial system came very close to breakdown. An extraordinary number of companies were, and are, in acute financial distress, threatening mass lay-offs and the cessation of swathes of economic activity. There was an almost complete collapse in investor confidence, with attempts to sell every financial asset – even high-quality government bonds – in a desperate quest to hold cash. Such was the loss of generalised faith in the integrity of the system that the governor of the Bank of England, Andrew Bailey, came close to shutting the financial markets.
The scale of the incredible drama – much more acute than the financial crisis of September 2008 and still unfolding – only commanded half our attention. Most eyes understandably were focused on the march of the coronavirus and the missteps and miscommunications of a prime minister unsuited for the leadership demands of high office.
The confusion and growing public panic at the uncertain response was amplified manyfold in the financial markets, matched by fear and uncertainty in the real economy that produces the goods and services we want and need. The Treasury and the Bank of England stared into an abyss. Thankfully their officials, derided by the cabal of second-rate ideologue advisers at Number 10, were up to the task.
Here Boris Johnson – and the country – got lucky. The Conservative party, broken by the triumph of anti-EU ideology and the wilful disregard for fact that is the hallmark of the Brexiter mindset, now offers the weakest talent pool in its long history. But the chancellor, Rishi Sunak, is an unexpected outlier. Officials report that he is proving highly intelligent, economically literate, agile and with acutely sensitive political antennae. Thus the unprecedented interventions last week – with much more to come in the weeks ahead.
Even as I write, the Treasury and the Bank are in urgent talks to organise bailout packages for a number of top companies (including, but not only, airlines), sometimes taking government share stakes along the lines of the bailout of RBS in 2008.
But it was only last Monday that the government genuinely thought that if it stood behind business with a massive programme of soft loans, with grants for hard-hit sectors, it might escape without having to go much further. It did not need to sully its hands with un-Tory propositions – underwriting worker incomes together with improved benefits for those thrown out of work.
However, the crisis of confidence in the financial markets and intense lobbying by the CBI and the TUC soon changed minds, none faster than the initially sceptical Sunak. After all, business cannot prosper without buyers for its products: the good health and predictable incomes of the working population are vital. The last vestiges of Thatcherite individualism are being torched. Social partnership is back with a vengeance
Meanwhile, the top echelons of the Bank of England witnessed the consequences of the outbreak as mounting panic in global trading hit British markets badly, all magnified by Johnson’s bumbles. The sterling crisis expected with a no-deal Brexit was brought forward: a currency dependent on the “kindness of strangers”, given the scale of Britain’s monumental international balance of payments deficit, was in near freefall. There had to be a twin response: a fiscal one that “would blow the bloody wall down” and a shock-and-awe monetary intervention to try to steady shattered bond markets.
The Bank moved first, committing to a £200bn programme of printing money to buy bonds (quantitative easing) and cutting interest rates to a symbolic 0.1%. For the moment, the markets have steadied. Then came Sunak’s measures, the centrepiece of which was the commitment to pay 80% of the wages (up to £2,500 a month) of workers threatened by lay-off. He also ratcheted up support for renters and those on universal credit.
Two million people working in the now shut hospitality sector will be immediately eligible, along with up to five million more as the economy contracts by at least one fifth in the months ahead, with the expected package for the self-employed adding yet more. At its peak, the cost per month will exceed £25bn and the scheme will plainly need extending. The budget deficit in 2020-21 will comfortably exceed £200bn, to be financed, if necessary, by the Bank of England printing money. There are no other options. One privy to the policy told me that even at the last they were unsure whether Sunak “had the balls”. He did. It is what had to be done – and is being reproduced across Europe and North America.
It is wartime finance for wartime economic conditions. Over and above the multiple bailout packages currently being negotiated will come state direction and manufacture of vaccines, key medical products, respirators, and the takeover of private hospitals. Key workers – in the NHS, police, transport and food supply chain – will have to be marshalled in their millions and their wellbeing and health protected. Rationing of key foodstuffs will need to be imposed. The only way to head off a full-scale collapse of sterling and protracted economic depression will be to defer Brexit for at least a year or, as one source told me, five years. Government communications will have to be infinitely more sure-footed. The government itself has to be 100% trusted.
The open question is whether Johnson’s government, with its “frighteningly weak” core at Number 10, as one insider reported to me, can do what is necessary. If not there will, as in wartime, have to be a national government (headed by Sunak with Keir Starmer as his deputy). Johnson is too divisive a figure, too thin-skinned, too unserious in his messaging and with too divisive a history, to lead.
Sunak and Starmer offer competence and humanity above ideology. Whether through the deferral of Brexit or smart and well-thought-through state direction of the economy, they will do what is needed to get us through. In the meantime, take social distancing seriously. Be one of those who put society and social obligations first. And stay safe.
Last week, the British economic and financial system came very close to breakdown. An extraordinary number of companies were, and are, in acute financial distress, threatening mass lay-offs and the cessation of swathes of economic activity. There was an almost complete collapse in investor confidence, with attempts to sell every financial asset – even high-quality government bonds – in a desperate quest to hold cash. Such was the loss of generalised faith in the integrity of the system that the governor of the Bank of England, Andrew Bailey, came close to shutting the financial markets.
The scale of the incredible drama – much more acute than the financial crisis of September 2008 and still unfolding – only commanded half our attention. Most eyes understandably were focused on the march of the coronavirus and the missteps and miscommunications of a prime minister unsuited for the leadership demands of high office.
The confusion and growing public panic at the uncertain response was amplified manyfold in the financial markets, matched by fear and uncertainty in the real economy that produces the goods and services we want and need. The Treasury and the Bank of England stared into an abyss. Thankfully their officials, derided by the cabal of second-rate ideologue advisers at Number 10, were up to the task.
Here Boris Johnson – and the country – got lucky. The Conservative party, broken by the triumph of anti-EU ideology and the wilful disregard for fact that is the hallmark of the Brexiter mindset, now offers the weakest talent pool in its long history. But the chancellor, Rishi Sunak, is an unexpected outlier. Officials report that he is proving highly intelligent, economically literate, agile and with acutely sensitive political antennae. Thus the unprecedented interventions last week – with much more to come in the weeks ahead.
Even as I write, the Treasury and the Bank are in urgent talks to organise bailout packages for a number of top companies (including, but not only, airlines), sometimes taking government share stakes along the lines of the bailout of RBS in 2008.
But it was only last Monday that the government genuinely thought that if it stood behind business with a massive programme of soft loans, with grants for hard-hit sectors, it might escape without having to go much further. It did not need to sully its hands with un-Tory propositions – underwriting worker incomes together with improved benefits for those thrown out of work.
However, the crisis of confidence in the financial markets and intense lobbying by the CBI and the TUC soon changed minds, none faster than the initially sceptical Sunak. After all, business cannot prosper without buyers for its products: the good health and predictable incomes of the working population are vital. The last vestiges of Thatcherite individualism are being torched. Social partnership is back with a vengeance
Meanwhile, the top echelons of the Bank of England witnessed the consequences of the outbreak as mounting panic in global trading hit British markets badly, all magnified by Johnson’s bumbles. The sterling crisis expected with a no-deal Brexit was brought forward: a currency dependent on the “kindness of strangers”, given the scale of Britain’s monumental international balance of payments deficit, was in near freefall. There had to be a twin response: a fiscal one that “would blow the bloody wall down” and a shock-and-awe monetary intervention to try to steady shattered bond markets.
The Bank moved first, committing to a £200bn programme of printing money to buy bonds (quantitative easing) and cutting interest rates to a symbolic 0.1%. For the moment, the markets have steadied. Then came Sunak’s measures, the centrepiece of which was the commitment to pay 80% of the wages (up to £2,500 a month) of workers threatened by lay-off. He also ratcheted up support for renters and those on universal credit.
Two million people working in the now shut hospitality sector will be immediately eligible, along with up to five million more as the economy contracts by at least one fifth in the months ahead, with the expected package for the self-employed adding yet more. At its peak, the cost per month will exceed £25bn and the scheme will plainly need extending. The budget deficit in 2020-21 will comfortably exceed £200bn, to be financed, if necessary, by the Bank of England printing money. There are no other options. One privy to the policy told me that even at the last they were unsure whether Sunak “had the balls”. He did. It is what had to be done – and is being reproduced across Europe and North America.
It is wartime finance for wartime economic conditions. Over and above the multiple bailout packages currently being negotiated will come state direction and manufacture of vaccines, key medical products, respirators, and the takeover of private hospitals. Key workers – in the NHS, police, transport and food supply chain – will have to be marshalled in their millions and their wellbeing and health protected. Rationing of key foodstuffs will need to be imposed. The only way to head off a full-scale collapse of sterling and protracted economic depression will be to defer Brexit for at least a year or, as one source told me, five years. Government communications will have to be infinitely more sure-footed. The government itself has to be 100% trusted.
The open question is whether Johnson’s government, with its “frighteningly weak” core at Number 10, as one insider reported to me, can do what is necessary. If not there will, as in wartime, have to be a national government (headed by Sunak with Keir Starmer as his deputy). Johnson is too divisive a figure, too thin-skinned, too unserious in his messaging and with too divisive a history, to lead.
Sunak and Starmer offer competence and humanity above ideology. Whether through the deferral of Brexit or smart and well-thought-through state direction of the economy, they will do what is needed to get us through. In the meantime, take social distancing seriously. Be one of those who put society and social obligations first. And stay safe.
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