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25 July 2019updated 07 Jun 2021 3:27pm

Cabinet audit: What does Sajid Javid at the Treasury mean for policy?

By Patrick Maguire

So far optimism has been the watchword of Boris Johnson’s time in office, and no department will be quite as central to translating it into a coherent programme for government – or election – than the Treasury, where Sajid Javid has taken the reins. 

That the former home secretary has been given the nod over the likes of Liz Truss, who backed the new Prime Minister earlier, is a testament to the strong account he gave of himself in the early stages of the leadership contest, which saw him make a much more convincing and articulate pitch for the frontrunner’s policy of tax cuts for high earners than Johnson ever managed to. 

It also comes despite his provenance as a protege of George Osborne, under whom he served as a junior Treasury minister, and a decision to back Remain in 2016 that inspired such a visceral reaction among Brexiteers that, to some, he remains persona non grata. But since then he has made his peace with a no-deal Brexit, a potential economic catastrophe that will dominate his first 100 days at No 11. 

How might Javid prepare? It is clear, both from his and Johnson’s rhetoric, that their solution will involve not only an emergency budget to lay the fiscal groundwork for no-deal in the Autumn, but a significant loosening of the spending straitjacket that constrained both George Osborne and Philip Hammond. (Hammond, incidentally, criticised Javid and Johnson’s failure to explain how they would fund their expensive pledges during the campaign.)

The broad contours of the new Prime Minister’s plan for spending on infrastructure, health, education and the police are broadly aligned with measures that Javid has advocated in the past: a £50bn fund for new housing, a £100bn infrastructure fund –  for spending on superfast broadband and new transport links – and 20,000 new police officers. Then, of course, there is Johnson’s casual pledge to fix the social care crisis “once and for all” – which may well prove to be the most expensive sentence will utter as Prime Minister.

As well as that hefty programme of new spending, Johnson and Javid have also made clear their desire to cut taxes – which will only exacerbate their fiscal headache. But that’s optimism for you. If they are willing to abandon Philip Hammond’s budgetary rules – namely his target to keep public sector borrowing at two per cent of GDP and his commitment to keep public sector debt falling every year – then they will have much more headroom to do so. 

Will Javid be so bold as to do so? Interrogate the sunny rhetoric a little and it isn’t entirely clear. His deputy Rishi Sunak, the new Chief Secretary to the Treasury, said this morning that the government would keep debt falling every year – a commitment neither Johnson nor Javid made as leadership candidates. If Javid stays true to that promise, then it is hard to see where the optimism is going to flow from: Johnson likes to talk of the £39bn divorce bill as “lubrication” for a no-deal scenario, but its payment is phased and some has already been given to Brussels. There is also the small matter of the government’s lack of a majority, which makes any serious tax and spending commitments very difficult indeed. 

We might also note that almost every Eurosceptic minister to have been given a job in a delivery department – Philip Hammond, don’t forget, started life as one of them, and Michael Gove was another – comes out the other side warier of no-deal than when they arrived. Faced with the institutional might of the Treasury and the brute economic reality of a no-deal Brexit, there is no guarantee that Javid’s bolder pledges will survive – especially given that he is not a personal or, in normal times, even a political ally of Johnson (compare their relationship to that of Jeremy Corbyn and John McDonnell, or David Cameron and George Osborne). 

But all of these questions will be moot, of course, if Javid’s real role is to prepare an economic programme for a snap election. 

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