Rishi Sunak’s first job? Clearing up his own mess

 A clever man, with a penchant for bad ideas writes The Economist

Oct 25th 2022

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.

Lay-offs are the worst of the bleak options facing recession-hit companies

Some groups are becoming more creative, offering short-time working rather than redundancies observes Andrew Hill in the FT

From the videotapes to the workplace hugs, much of Broadcast News, the 1987 satire on media, looks old-fashioned. But when I watched the film again recently, as an escape from pandemic-provoked gloom, the scene where the network announces a round of redundancies seemed raw and relevant. 

“If there’s anything I can do,” says the network director, relieved at how a veteran newsman has accepted the news of his forced early retirement. “Well, I certainly hope you die soon,” responds the departing colleague. 

Similar scenes are playing out at companies around the world. Marks and Spencer, the retailer, Melrose, which owns venerable manufacturer GKN, New York-based Macy’s department store, and European aircraft-maker Airbus have all announced potential cuts in recent weeks. Manufacturing trade group Make UK has warned of a “jobs bloodbath”. Newsrooms have been particularly hard hit. 

One added twist is that some of today’s lay-off conversations with unlucky staff will take place by video link rather than in person — easier for nervous managers, but crueller for the people they are laying off. 

Another, more positive, development is that companies are becoming more creative as they brace for recession, turning to short-time working rather than lay-offs. As governments remove subsidies, what was a simple decision to hold staff in reserve, rather than fire them, will become more complicated. But avoiding permanent cuts makes sense, according to David Cote, former chief executive of Honeywell. The sheer cost of severance — in time, money and administrative hassle — mounts up. Often you have to hire the staff back to meet demand as the economy recovers. 

“If someone told you that it would take you six months to build a factory, six months to recover your investment, you’ll get a return for six months, and then you’ll shut it down, you’d never go for it because it would be ridiculous,” he writes in his new book Winning Now, Winning Later. “Yet somehow leaders think it makes sense to do the same with people.” 

Honeywell’s reliance on furlough — combined with its commitment to customers, sustained long-term investment, and attention to supplier relations — helped it bounce back.  

Research also backs up the hunch on which Mr Cote acted 12 years ago. A 2011 OECD review of 19 countries’ experience of short-time working confirmed such schemes preserved permanent workers’ jobs beyond recession. In a recent article for Harvard Business Review, Sandra Sucher and Shalene Gupta applaud US companies such as Tesla and Marriott for using furlough to soften the blow of this crisis. Such schemes let companies “maintain connections with their employees, cut costs while still providing employee benefits, and create a path to a seamless recovery”. 

Yet defending the decision in 2008 was one of the toughest points of Mr Cote’s tenure as Honeywell’s boss. 

Management, employees and investors were not “trained” to accept short-time working as a solution, he told me. Laws differed from country to country, and even state to state. In regions where furlough was put to a vote, support varied in line with the enthusiasm of managers for the measure. Elsewhere, while workers backed short-time working publicly, as Honeywell pushed through successive rounds of furlough, Mr Cote received private notes from staff urging him to “lay off 10 per cent of our people and have done with it”. As one FT reader commented when we asked recently about individuals’ experience of furlough: “Loneliness, anxiety, depression and guilt are hourly occurrences.” 

“All recessions are different,” Mr Cote says, “but they all feel miserable.” He remains convinced, though, that irreversible job cuts would have undermined Honeywell’s ability to respond to an economic upturn, ultimately harming staff, investors and customers.  

Jamie Dimon, chief executive of JPMorgan Chase, has declared that “this is not a normal recession”. Mr Cote suggests, rather, that 80 per cent of the actions companies take to respond to recession are common across downturns, whether triggered by oil crises, inflation, terror attacks or mortgage mis-selling. To managers, he offers this advice: don’t panic; think independently; keep investing for the long term; communicate; and “whatever you do, let people know you’re sacrificing too”. 

Some things, though, don’t change. “This is a brutal lay-off,” remarks Jack Nicholson’s smug anchorman, visiting the newsroom in Broadcast News, supposedly in solidarity with his colleagues. “You can make it a little less brutal by knocking a million dollars or so off your salary,” says his boss, before rapidly backtracking in the face of the trademark Nicholson glare. 

Most ingredients are in place for a property crash later this year

Rising unemployment is toxic for the property market and low interest rates may not be enough writes Larry Elliott in The Guardian 

 

Spring is usually the time when the property market comes out of hibernation. Photograph: lucemac/GuardianWitness


This weekend marks the start of a truncated summer house buying season, the moment the residential property market comes out of hibernation.

Normally this happens at Easter but, for obvious reasons, that has not been possible in 2020. Estate agents have been shuttered along with almost every other business, waiting impatiently for the lifting of the lockdown. This bank holiday weekend, with fine weather forecast, provides a chance to make up for lost time.

Well, perhaps. Britain’s love affair with rising house prices borders on the pathological so a mini boom can’t entirely be ruled out. The government did its best last week to give the market a boost by extending its mortgage holiday for the financially distressed for a further three months. That means those having trouble keeping up with their home loans won’t have to make a repayment until at least September.

That said, the notion that this is going to be a year of high turnover and rising house prices is wide of the mark. All the ingredients, bar one, is in place for a crash later in the year.  

Let’s start with the obvious: the economy has been poleaxed by the Covid-19 pandemic. The official jobless figures – showing a rise to 2.1 million in claimant count unemployment – provide only a hint of the damage that has been caused to the labour market by the lockdown. A truer picture comes from the number of jobs furloughed under the Treasury’s wage subsidy scheme, which stands at 8m and counting.

Not every one of those furloughed workers is going to end up jobless, but some of them will. The number will depend, crucially, on how long it takes for the economy to return to something like normal. The slower the process the more businesses will close permanently.

Rishi Sunak announced earlier this month that the furloughing scheme will be kept going until the end of October, but from the start of August employers will be asked to foot part of the wage bill themselves. At present, the government is paying 80% of wages up to a monthly maximum of £2,500, an expensive commitment that helps explain why the state borrowed almost as much in April (£62bn) as in the whole of the last financial year.

The chancellor will announce in the next few days how big a contribution employers will need to make, but at a minimum they can expect to pay 20% of an employee’s wages. This will be the moment of truth for many businesses.

Rising unemployment is toxic for the property market. If people struggle to find another job quickly after losing their job they fall into mortgage arrears and eventually have their homes repossessed. That happened in the early 1990s and is one reason why a mortgage holiday has been introduced this time.

Hansen Lu, property economist at Capital Economics, has shown how a moratorium on home loan payments saves someone paying 2.5% on a £200,000 mortgage £5,400 over a six-month period. That’s quite a financial cushion because although the lender eventually has to be paid back, it means subsequent mortgage payments go up by about £30 a month.

Again, everything depends on the state of the labour market this autumn. The mortgage holiday will end at the same time as the furlough scheme, and already there will be many households who will be wondering how they will manage at that point.

Buying a house is the single biggest financial commitment most of us ever make. When people are deciding whether to buy or not, they think hard about whether they are going to be able to keep up the monthly payments. It is not just being unemployed that matters; it is the threat of unemployment. Surveys suggest, hardly surprisingly, that consumers are extremely wary of committing to big-ticket items.

Only one thing is missing from a perfect storm: sharply rising interest rates. A doubling of official interest rates was the trigger for recession and record home repossessions in the early 1990s, but there is not the slightest prospect of that happening this time. The Bank of England has cut interest rates to 0.1% and is debating whether to take them negative.

There are economists – the monetarist Tim Congdon, for example – who believe that the vast quantities of money the Bank is chucking at the economy will eventually lead to much higher inflation. In those circumstances Threadneedle Street would have a choice: raise interest rates aggressively to hit the government’s 2% inflation target and guarantee deep recession in the process; or go easy. If it chooses the first option the housing market will collapse because many owner occupiers can only service the debts they have had to to incur to afford expensive real estate if interest rates remain at historically low levels.

So here’s how things stack up. On the one hand, the economy has collapsed and is recovering only falteringly; unemployment, whether real or hidden by the furlough, is rocketing; incomes are being squeezed; consumer confidence is at a low ebb; and the ratio of house prices to earnings is high. On the other hand, interest rates are low and will stay low for some time. In the jargon of the economics profession, there are more downside than upside risks.

But let me personalise things a bit. A relative for whom I hold power of attorney is about to have his house put on the market to fund his care home fees. My intention is to take the first halfway decent offer that’s received, because my sense is that prices are heading lower. In the past I haven’t heeded my own advice and lived to regret it. Not this time, though.

Returning to work in the coronavirus crisis: what are your rights?

Hilary Osborne in The Guardian 

 

Some people may be concerned about returning to work during the coronavirus crisis. Photograph: Matthew Horwood/Getty Images


As the lockdown restrictions begin to be eased across the UK, more workers are being asked to return to the workplace.

The government has said that employees should only be asked to go back if they cannot do their job from home, so if you can, your employer should not be asking you to travel in to work.

If you do need to go to your workplace, your employer is obliged to make sure you will be safe there. Employment lawyer Matt Gingell says: “Employers have a general duty to ensure, as far as reasonably practicable, the health, safety and welfare of all of their employees.”

Here’s a guide to your rights if your employer wants you back in the workplace.

How much notice should I be given that I have to return?

“If employees are unable to work from home, employers can ask employees to return to work and, technically, no notice is required,” says Gingell.

Solicitor and consumer law expert Gary Rycroft says there is no notice period written into law “but giving at least 48 hours’ notice should allow either side to have discussions and air any concerns or even official ‘grievances’”.

The advisory group Acas says employers need to check if there are any arrangements in place with unions or similar about notice. It advises: “Employees and workers should be ready to return to work at short notice, but employers should be flexible where possible.”

So while your employer could ask you to return straight away, a good employer would understand if there were things you needed to put in place first, and give you chance to do so.

What if I was furloughed?

When you were furloughed your employer should have outlined what would happen when it wanted you to go back to work, and this may have a clause saying that you have to return as soon as you are asked.

“The termination of the furlough agreement and when an employee will be expected to return to work will depend on the provisions of the agreement,” says Gingell. Again, though, even if there is no notice period, a good employer should realise that you may need some time to prepare.

If you have been furloughed under the government’s job retention scheme, your employer can’t ask you to go in and do ad hoc days, or work part-time. They would need to take you off furlough and renegotiate your contract with you.

Can they ask me to go back in part-time?

Not, currently, if you have been furloughed and they are using the government scheme to pay you. It only allows companies to furlough people for all of their normal hours, and bans them from asking you to do any work while you are off.

But if your company has not claimed government money to cover your wages, it can ask you to resume work part-time. Make sure you understand the terms of the request – your employer cannot adjust your contract without your permission, so if it is asking you to change your hours you should get advice.

Can they ask me to take a pay cut?

“The law here is the same as it would be if an employer made the same request in the normal course of an employee’s employment. Reducing hours and/or pay are deemed to be such fundamental changes to an employee’s terms and conditions that the employee concerned should be consulted and then agree in writing,” says Rycroft.

He points out that for some employers “this may be the only economically viable option”, and the alternative, if people refuse, could be redundancies. To make more than 20 people redundant there will need to be collective consultation.

What if I am in a vulnerable group or live with someone who is?

No special rules have been put in place to protect people in these groups who are asked to go into work but some already exist – if you are disabled or pregnant, for example, your employer has extra obligations.

Rycroft says some employees may be able to argue that it will be discriminatory to force them to attend work outside the home. “It is all a question of degrees, in terms of how the employer can show that they have listened to legitimate concerns and made reasonable adjustments,” he says.

If you are pregnant your employer is obliged to make sure you can do your job safely. This can mean allowing you to do your job from home, or giving you a new role which can be done remotely. If your employer refuses either of these options, and you do not feel safe going into work you should take advice. Employmentsolicitor.com says that you could be able to argue for a medical suspension on full pay, which will allow you to stay at home.

Living with someone who is vulnerable or especially at risk is not necessarily a reason an employee can refuse to return to work, says Rycroft. “However, you can, as an employee raise a grievance and ask to be listened to and hopefully a compromise may be agreed, such as unpaid leave or using up annual holiday. But if an employer can show that a workplace is safe, the employer may insist on an employee attending.”
What if I have childcare to worry about?

Legally, you can take time off to look after any dependants – these could be children, or older relatives. This time is typically unpaid. If you are currently furloughed and your employer does not have enough work for everyone to go back full-time, they may agree to leave you on furlough so you can continue to earn 80% of your normal pay.

What information should they give me in advance?

Rycroft says there is no law saying that employers should provide information before you return, but the government guidance to employers recommends that they do. He says this information – written or verbal – should cover how they are making your workplace safe in light of the pandemic. So you should be told what is happening to ensure social distancing and hygiene. “This will allow employees to understand how their health and safety at work is being addressed.

Can I refuse to go back?

Yes, if you believe there is a real danger to going to work. “If an employee refuses to return to the workplace due to the employee reasonably believing imminent and serious danger and is then dismissed for that reason the employee could, depending on the circumstances, have a claim for unfair dismissal,” Gingell says.

“The requirement that the employee has to believe that there is imminent and serious danger, does limit the right.”

Otherwise, you cannot refuse. “If someone refuses to attend work without a valid reason, it could result in disciplinary action,” says Acas. But you may be able to make other arrangements with your employer – perhaps you can use holiday or take unpaid leave, or if you have concerns about something like travelling at peak time, they may be willing to accommodate different shifts. Your employer does not have to agree to this, but it is worth asking.

What if I am worried when I see my workplace?

Rycroft says that under section 100 of the Employment Rights Act 1996 employees may leave a place of work where there is an imminent health and safety danger. So if, for example, you return to find social distancing is impossible, you could argue that this is a reason to leave your workplace.

But in the first instance you should try to resolve the issue with your boss. Gingell says: “Employers ought to to listen to the concerns of individuals and be sympathetic and understanding.”

If you do not get anywhere with this, you should take advice. If you are in a union, it should have a helpline you can call if there is no rep to speak to on site. Acas is another port of call, as is Citizens Advice.

“If the employer has breached the implied obligation to provide a safe working environment and/or trust and confidence an employee could, again, depending on the circumstances, resign swiftly as a result and claim constructive unfair dismissal,” says Gingell. But he says you should get advice before taking this action.

“Another option for employees to consider is contactIng the Health and Safety Executive, which enforces health and safety legislation,” he says.