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The odd couple of Downing Street will soon face a severe stress test | Unemployment

The odd couple of Downing Street will soon face a severe stress test | Unemployment


Boris Johnson told the most recent meeting of his cabinet that they had been “sailing into the teeth of a gale” before promising them “there will be brighter days and calmer seas ahead”. Which would make me very nervous about venturing out on a boat with this prime minister. He clearly does not check the weather forecast. What lies ahead is not calmer seas, but even more turbulent waters. The government is heading into a storm the like of which neither he nor anyone else on his inexperienced crew has ever endured.

There is a vast black cloud massing on the near horizon. It is the looming horror of mass unemployment. The virus-induced slump has already had a nasty effect on many Britons, but for quite a lot of voters the experience has not yet been as horrible as they may have first feared. The impact has been softened by improved welfare payments, job-retention schemes, business rescue packages and other emergency measures. This has delayed the reckoning. Though the public has taken an increasingly dim view of the government’s handling of the epidemic, Tory MPs have been able to clutch to the consolation that their party has maintained a lead over Labour on economic competence. They cannot be sure that will endure as support schemes unwind. One veteran Tory remarks of the cabinet: “This is a generation of politicians who have no experience of mass unemployment. If we go into Christmas with three million people unemployed, that will be beyond ghastly. The psychological shock will be enormous.”

Optimists hope that the speedy production of a vaccine will be accompanied by a rapid turnaround in the global economy. The pessimists fear a second wave of infection that pushes under companies that just survived the first. There will be multiplied distress on business if the increasingly acrimonious negotiations with the EU collapse and Britain crashes out of the single market at the end of the year. In a forecast that does not assume the very worst, the Office for Budget Responsibility is predicting unemployment will peak at just under 12%, a level of joblessness not witnessed in Britain since the deindustrialisation of the 1980s that left permanent scarring on many towns and cities and their people.

All this would put a severe strain on a super-competent government that could draw on large reserves of public trust. This is a government characterised even by its own supporters as one for whom a successful period is getting through a day without performing more than one U-turn.

How well they navigate the oncoming tempest will be crucially dependent on the relationship between Boris Johnson and Rishi Sunak, one of the stranger couplings to live at Numbers 10 and 11. There have been times when economic crisis has bound together the neighbours. Believing they would sink or swim together. Jim Callaghan and Denis Healey had each other’s backs during the serial storms that battered the Labour government of the 1970s. Margaret Thatcher and Sir Geoffrey Howe united in insisting that there was no alternative to their policies when unemployment topped three million in the 1980s. It was later that their relationship fell apart. David Cameron and George Osborne stuck together during the austerity years that followed the 2010 election.

As often, crisis has destroyed the most important relationship in government. John Major sacked Norman Lamont, who managed his campaign to become prime minister, after Black Wednesday in 1992. Following the financial crisis, the previous friendship of Gordon Brown and Alistair Darling did not protect an embattled chancellor from being undermined by a paranoid prime minister. Theresa May had a poisonous relationship with Philip Hammond. Boris Johnson has already got rid of one chancellor.

In the first phase of the crisis, he and Mr Sunak were tied together. The latter owed his rapid ascent to the older man at Number 10; the prime minister needed a chancellor who addressed the immediate consequences of the crisis with confidence and decisiveness. Both shared the goal of mitigating the damage wreaked by the virus. From hereon, the differences will become starker between two men with contrasting personalities and clashing philosophies. The chancellor gets high marks from Treasury officials for his even temperament and attention to detail, qualities rarely at the top of anyone’s list when describing the prime minister. Mr Sunak is one of nature’s head boys. Indeed, he was head boy at Winchester College. He is the kind of person that Mr Johnson likes to describe as “a girly swot”.

The prime minister is more your classroom clown. He is also a very durable one, the chancellor should note. Mr Johnson did not cap an extremely chequered career by becoming prime minister without a highly evolved and extremely ruthless sense of self-preservation. Where the Tory leader has ridden the rollercoaster of public life for decades, the younger man next door has yet to experience serious political adversity. He is the only member of the cabinet to have earned positive approval ratings during the crisis, but as one Tory MP remarks acerbically: “It’s not so hard to be popular when you are dishing out cut-price meals.” Another Conservative MP, generally an admirer of the chancellor, notes: “Rishi has yet to be tested in the flames.”

There have been warnings to the chancellor in the past week that his honeymoon period is drawing to its close. He has suffered his first singeing from aggravated Tory MPs and his first searing from hostile commentary in the Tory press. At Number 10, which does not enjoy all the chatter about a floundering Mr Johnson being replaced as Tory leader by smooth and shiny Mr Sunak, they do not seem upset that some negative headlines have put a few dents in the chancellor’s golden boy image.

The trigger was the suggestion that taxes will have to go up to help pay the bill for the vast sums spent on the crisis and some increases being looked at by the Treasury will fall on the affluent, big business and motorists, all constituencies with vocal Tory champions. The chancellor hurried to reassure backbenchers there wouldn’t be a “horror show of tax rises”. Less widely quoted, but more significant, was his remark to the same meeting of the 2019 intake that the Conservatives “must not surrender our position as the party of economic competence and sound finance”.

Though he has taken extraordinary measures in the crisis, the chancellor is fundamentally a conventional Conservative when it comes to the public finances. National debt already stands at more than 100% of GDP for the first time in more than half a century. The Treasury view is that the government cannot forever pile up more and more borrowing. Most agree that, while it would be a mistake to do anything dramatic until a sustained recovery is in place, there will ultimately have to be some combination of tax increases and spending cuts.

This will present the government with very unappetising choices. Do they squeeze the public sector as during the Cameron/Osborne austerity or will taxpayers be asked to bear the brunt of retrenchment? Should they keep the “triple-lock” commitment to the retired or make pension increases less generous to improve help for younger people entering a bleak job market? Will they tilt spending away from the traditional Conservative heartlands to concentrate support in the more economically insecure areas now represented by the Tories?

Hard choices will place immense strain on the electoral coalition that won them power and fiercely divide Conservative MPs. They will also stress-test the relationship between the neighbours of Downing Street. When it comes to money, the prime minister is not a conservative. He is a please-everyone populist who hates to find himself anywhere near a difficult decision. “You know Boris,” says a senior Tory. “He wants to spend more everywhere and cut taxes for everyone.” Someone who has known the prime minister for decades quips that his response to Treasury anxiety about soaring debt will be to reply: “Get the Bank of England to print more money!”

This kind of tension is programmed into the relationship. Prime ministers habitually complain that the next-door neighbour is obsessed with the balance sheet. Chancellors typically find prime ministers to be spendthrifts. The friction between the current Downing Street neighbours is going to be that much more extreme because of the highly challenging circumstances that will confront them. A storm is coming for this prime minister and his chancellor. It would be unwise to bet that both will make it to safe harbour.

• Andrew Rawnsley is Chief Political Commentator of the Observer


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