Rishi Sunak imposed austerity by stealth – and the poorest will feel the pain | Raphael Behr
Jhere is a pattern by which the conservative party chooses its leaders as an antidote to its predecessor. Theresa May was the solid answer to David Cameron’s frailty; Boris Johnson promised to be a daredevil where May had been austere.
On this principle, Rishi Sunak had positioned himself as the candidate of sincerity and competence, Boris Johnson being the opposite of these embodied qualities. When the prime minister looked set to be overthrown in the partygate scandal, the chancellor’s support was mixed.
Then came the war in Ukraine, a geopolitical crisis that made any national scandal seem parochial in comparison. The change in perspective was a reprieve for Johnson. Conservative MPs are no longer agitating for a replacement. Sunak’s loyalty can no longer waver so visibly.
Ambition is not diluted. His expression was clear in a spring statement designed entirely around the Conservative party’s fetish for tax cuts. Sunak was under pressure to cancel a National Insurance hike planned for next month, labeled as a levy for health and social care.
Although the initial impetus for the move came from No 10, the Chancellor has bought into the political gamble – taking criticism for breaking a manifesto pledge to avoid the greatest electoral risk of a collapse in funding for the NHS. A U-turn would dent the budget, with the added sting of making it look weak by caving in to the demands of backbench and opposition MPs.
Moreover, the received wisdom in Downing Street is that the optimal time to cut taxes is just before an election. Voters could then carry the joyous atmosphere directly into the voting booth.
Sunak’s ideological preference for a small state is beyond doubt. He’s a staunch Thatcherite but of a particular denomination – the cult of tax flagellants that insists on discipline in borrowing, deficit reduction and tight spending before indulging in the pleasure of tax cuts. He was keen in his speech on Wednesday to highlight how borrowing costs have risen and how global uncertainty demands compliance with “fiscal rules with a margin of safety.”
But for many Tory MPs, the best time to cut taxes is still now. The Chancellor didn’t want to disappoint them – and he came up with a solution that was more politically elegant than economically rational. The impact of the National Insurance increase will be mitigated by raising the threshold at which the tax is paid. More exciting for the Tories, Sunak has also booked a 1p reduction in the basic rate of income tax for 2024. A VAT cut on solar panels and insulation will help homeowners with an income available enough to be in the market for greener energy equipment, which is not the demographic that most needs immediate help.
It’s no consolation for people struggling with their bills right now, but little of the spring statement was aimed further than the Tory benches. In terms of the immediate cost of living crisis, there was a 5% cut in fuel tax and an increase in the household support fund – a meager pool of grants from local authorities.
Meanwhile, inflation will reduce the real value of state benefits and departmental budgets. Despite the Chancellor’s stated intention to throw a warm blanket of economic security around the shoulders of the nation, those with the lowest incomes will be left behind.
The whole expressed a rhetorical contortion. Sunak wants to satisfy the Conservatives’ self-image as a low-tax party. At the same time, he cannot ignore the economic reality shaped by the pandemic, the war in Europe and the public demand for services that are not completely abandoned. Overall tax pressure will still be at its highest level since the late 1940s. The Office for Budget Responsibility expects real household disposable income to fall this year at the fastest rate since records began.
What the Chancellor heralded as an exercise in building economic resilience is actually stealth austerity, with the pain felt most by those who can least afford it. It promises a bumpy ride to the next election, albeit with comfort breaks for some conservative target voters.
The political consequences are impossible to predict. Governments generally do not become more popular by impoverishing millions of people. Again, Britain has a reputation for swallowing the bitter economic pills handed out by Conservative governments and bringing the party back to power, while Labor waits in vain for the pendulum to swing.
In the current crisis, Johnson and Sunak have a real alibi. It was Vladimir Putin who invaded Ukraine. This aggression, and the Western sanctions to punish it, threaten a long war of economic attrition with a totalitarian state that does not hesitate to impoverish its own citizens. Fuel is the first product affected. The grain comes next. Ukraine and Russia account for about a quarter of world wheat exports. A prolonged war will make food scarce in some countries and more expensive everywhere.
These are perils voters in Western Europe have not seen in generations. They demand a level of candor from politicians about the scale and duration of the sacrifices needed; also, economic policies that fairly distribute the costs.
Nothing in Johnson’s career suggests he can rise to that challenge. Any residual hope that he might do so was dashed when he compared Ukraine’s battle for survival to Britain’s decision to leave the EU. History has invited the Prime Minister to strive for a Churchill-style mode of national reconciliation, the role he always imagined himself destined for. Instead, he chose the only path he knows: gross insensitivity and cynical division.
Sunak was lucky to be different. He came out of the pandemic poised to be the anti-Johnson; the serious alternative. But he missed the bend in the road. There is no more room for repudiation. Whether they trust each other or not, from now on Boris and Rishi are a deceptive double act; the same record, the same fate.
Rafael Behr is a Guardian columnist
Join Hugh Muir, Richard Partington and MP Anneliese Dodds at a livestreamed event on the cost of living crisis and its effects on the poorest households, Thursday 14 April 2022, 8pm BST | 9pm CEST | 12pm PDT | 3pm EDT Reserve your tickets here