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25 September 2020

What the Chancellor’s winter plan tells us about the real Rishi Sunak

The Chancellor is seen as generous by voters but cautious by Tory MPs. How long can he maintain both images?

By Stephen Bush

Rishi Sunak has announced a raft of measures to replace the furlough and business support schemes that are due to end in October.

The headline-grabber is a tweaked version of the partial furlough announced by Sunak in July: businesses and the state will top up employee wages, as long as staff are able to work at least a third of their hours. It means that for every pound you would have earned before the crisis, you will receive 67p – if, that is, you can work a third of your hours and your employer chooses to keep you on.

The Resolution Foundation argues that, as devised, the scheme makes it cheaper to keep one worker on full-time than to employ two workers part-time. The Treasury’s argument is that, in the real world, the additional costs of hiring and training new workers mean businesses are already incentivised to retain staff. That feels like a rather big bet about the economic recovery and the level of job creation that will happen in the next few months. It supposes businesses won’t be able to easily rehire workers they’ve let go, and that they will therefore choose to keep them on the books on a lower salary. But the reality is that following steep falls in the number of vacancies, those workers almost certainly will be available to be rehired, either permanently or to top up staff shortages whenever needed.

The explicit logic of Sunak’s measures is threefold. It holds that, firstly, these things all have to be paid for, so the cost of income protection schemes has to be curtailed sooner rather than later. Secondly, it reasons that a vaccine is a way off, so the economy needs to adjust to that reality rather than be set in aspic until the pandemic passes. Thirdly, it recognises that there is currently no prospect of a sufficiently advanced system to test, trace and isolate new cases of Covid-19 to facilitate an end to social distancing.

So if you’re employed by a theatre, a night club or any of the other businesses that cannot meaningfully operate in the era of social distancing, or by a business servicing city centres in any shape or form, these measures quite deliberately leave you out. More troublingly, there is nothing in the measures that ought to be there for you: an end to the welfare cap, a pause on rental evictions, or an increase in the generosity and eligibility of Universal Credit.

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That reflects one of the unappreciated truths about Rishi Sunak, as Katy Balls smartly notes over at the Telegraph: his political success is thanks to the fact many voters see him as different from the Conservative Party; but his popularity among Tory MPs comes because, in a government often defined by its willingness to break Conservative orthodoxies, Sunak is seen as “one of them” – concerned about excessive public spending. His popularity extends to the most influential of the coronavirus hawks who have argued for the kind of reopening we have already seen.

But the painful, real-world effects of Sunak’s three beliefs about excessive debt, the duration of the crisis and the government’s ability to get out of it may yet mean he cannot keep both his faces in place: and that either the public or Conservative MPs are going to end up disappointed.