Will Rishi Sunak jump or be pushed? The Prime Minister’s allies called on him to appoint Jeremy Hunt at number 11; meanwhile, some of the chancellor’s supporters believe that even at this late date it would be better to jump from a sinking ship.
However, such drastic actions would not be enough to save the career of either of them. Johnson could eventually fire Sunak in a shameless attempt to impose higher taxes and the impending recession entirely on his chancellor. But such a cynical trick alone will not save the prime minister, even if the consequences can be miraculously overcome: a real reset will require a complete change in taxes, spending, the economy, housing, energy, leveling and the environment. Given Johnson’s misreading of his 2016 and 2019 triumphs as a demand by the Tory Party to accept social democracy and command and control of the environment, there seems little hope that he will suddenly rediscover the market-minded conservatism he once had. claimed to believe.
As for Sunak, only a public rejection of the mistakes of the last two years can now restore his reputation among the Thatcherists who lied to him. In theory, Sunak could have done this quite easily: as Johnson’s chief financial officer, he was effectively forced to raise taxes to prevent a budget disaster, or so he could say. But the longer he stays in office and the more he brags about his fiscal masochism, the harder it becomes.
Has the Tory government ever been so ignorant, so disinterested in the economy, how to generate more output, jobs and wealth? Britain’s economic policy, at least since 2016, has been catastrophically bad. To his credit, Johnson secured a clean Brexit, but virtually every decision he has made since 2019 has conspired to undermine this historic achievement.
Business and the city were convinced that Brexit would be disastrous for growth, so Johnson and Sunak had to roll the red carpet, cut taxes and turn parts of the North into hardcore business zones that even Ayn Rand would approve of. They had to strive to steal jobs, capital and the best talents from the continent and create the conditions for an explosion in domestic entrepreneurship. Priorities had to include extensive deregulation, tax simplification, free trade as much as possible to lower the prices of imported goods, state-of-the-art customs infrastructure and attracting the private sector to finance infrastructure and new cities.
Instead, the policies adopted were almost comically inappropriate. Sunak raised taxes on income from labor and capital to pay for Johnson’s incredible extravagance, his billions for the NHS and almost all other government departments, his subsidies, energy donations and semi-finished welfare. Johnson halted the airport’s expansion, instead investing a fortune in the largely useless HS2 and signing an avalanche of environmental regulations, as well as additional bureaucracy for landlords, employers and supermarkets.
The government has done nothing to increase the supply of housing, and its green initiatives threaten to drastically reduce it. Efforts to boost nuclear energy – vital for the future of carbon emissions – have been outrageously inadequate, and refusing to allow fracking is deeply irresponsible. Britain faces a future of power outages, rationing and cripplingly expensive energy as a result of Johnson’s ideological obsession with turning green too quickly and without strategic thinking. The public sector is dysfunctional and unions are on strike.
It is true that Sunak has increased incentives for corporate investment, but the overall deterioration of the business environment, exacerbated by its arbitrary contingency tax, has offset any positive effects. The equalization program is fake, with zero change in the attractiveness of the poorer parts of the UK.
Confusing for a government facing an inflationary tsunami, the Tories refuse to discuss the role of interest rates or quantitative easing, as if the independence of the Bank of England gives it carte blanche to do whatever it wants. Brexit was partly to guarantee the accountability of politicians, not bureaucrats, so this denial of responsibility is difficult to forgive.
The bank’s contract with the government, its implementation and all aspects of monetary policy need to be urgently reviewed. Its operational independence must be maintained, but what is the right goal for inflation and sanctions for non-compliance? How to return to reasonable interest rates over time without unloading the economy? How to get rid of the constant quantitative easing and blurring of monetary and fiscal policy? What are the trade-offs between cheap and easy money and housing market bubbles that freeze young people?
The fact that these issues do not even arise is tragic evidence of this government’s lack of economic literacy. One of the truly amazing legacies of Blairism is that it raised a generation of Tories who believed it was pointless to discuss economic growth because they thought the Social Democrats were right. They naively believed that an expanding economy was a given; the question was how to split our income. There was some time left to discuss the accounting side of public finances, as well as what “levers” to use to attract foreign investment.
Even that has already disappeared. The tax debate has become purely political: who should strike to collect the most, not which taxes should be reduced to maximize growth. We are left with modern, centrally planned technocratic tricks, such as the absurd idea that more bus routes will transform the productivity of the North.
Britain is facing major, historic challenges that will require commensurately bold and imaginative decisions. The scale is similar to the battle between Keynesianism and monetarism, if not the struggle between capitalism and socialism. Britain is now an economy with low growth, low productivity and high taxes and costs. Our spending base is inflated, our corporate sector is distracted and our government is inefficient. How to urgently reverse the course? How to revolutionize our economy, society and culture? The dismissal of Rishi Sunak will not answer these epic questions, as even Boris Johnson must realize.
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