It sounded like a joke. Speaking of Boris Johnson, Rishi Sunak told the Sunday Times that he would like “to take his credit card away”. Beneath the humour, however, the Chancellor was making a deadly serious point: the Prime Minister has to stop spending like there is no tomorrow, or he will bankrupt Britain.
On Wednesday, the Chancellor will use his spending review to announce more money for the recruitment of police officers and nurses, building schools and hospitals, strengthening border controls, improving the penal system and GP appointments. But he will also reveal the true state of the British economy, and his aides say it will be “scary”.
The economy is expected to contract by 11 per cent this year, its worst performance in three centuries. Spending will exceed revenues by more than £350bn, a deficit unprecedented outside wartime. The national debt will exceed £2trn, roughly 105 per cent of gross domestic product, which is the highest level since World War Two. All that is before the negative consequences of Brexit kick in next year.
Much of this collapse in the country’s finances is an unavoidable consequence of the Covid-19 pandemic. The government had no choice but vastly to increase spending on the NHS, the furlough scheme and bailing out normally viable businesses and services. And it is right to invest in infrastructure projects that will generate growth and jobs, and to seek to “level up” while interest rates are so low.
But it would be reassuring if Johnson showed at least a hint of recognition of the parlous economic situation the country is in. As it is, he seems to have discovered a veritable forest of magic money trees. No cheque is left unsigned, no grand projet is too extravagant to embrace. He opposes tax increases. He rules out a return to austerity. He blithely promises billions here and billions there, often out of political expediency and with a cavalier disregard for the rules of accountability and the usual checks on public expenditure.
Last week alone, he promised the biggest expansion of military spending – replete with a fantastical new “space command” – since the height of the Cold War, pre-empting the government’s long-awaited Integrated Review of Security, Defence, Development and Foreign Policy and ignoring the MoD’s dire record on procurement. The timing suggested the announcement itself had less to do with equipping the armed forces than it did with resetting his image after the departure of Dominic Cummings, and currying favour with President-elect Joe Biden.
The day before that, Johnson promised £12bn for his “green industrial revolution” – another plank of his reset designed to appeal to Biden. The plan might have enjoyed rather more credibility had he not ignored the freeze on fuel duty that has now been in place for nine years.
The government has spent well in excess of £200bn countering Covid-19, but an alarming amount of that has been wasted: the failed £12bn test-and-trace app, the £7,000 a day paid to consultants, the £3.5bn paid out in fraudulent furlough claims, the £670,000 that Kate Bingham, the vaccine tsar, spent on PR.
Most egregiously, there were the lucrative government contracts for personal protective equipment awarded to a Miami jeweller, a pest control company, a cannabis research firm and assorted cronies. In a damning report last week, the National Audit Office revealed that £10.5bn had been doled out without any competitive tendering, much of it to “suppliers” with connections to Tory politicians.
The list goes on. Rightly or wrongly, Johnson is ploughing ahead with HS2 despite a price tag that has soared past £100bn and a rationale somewhat undermined by a year in which 40 per cent of the country have shown they can work exclusively from home.
By the year’s end, the government will have spent more than £8bn on Brexit preparations, according to the Institute of Government. That sum includes all those aborted information campaigns as the UK’s departure from the EU kept slipping, and the £14m that Chris Grayling famously gave to a start-up ferry company that owned no ferries.
Add in lost economic growth and the total Brexit cost will exceed £200bn, according to research by Bloomberg Economics. That is almost as much as all of Britain’s payments to the EU for the past 47 years combined.
There is the £400m that the government invested in a failed start-up company that makes satellites – one of Cummings’s pet enthusiasms (not to mention the pay-offs to Sonia Khan, a special adviser, and the various permanent secretaries whom he ousted from their jobs). Alok Sharma, the business secretary, overrode his civil servants’ warnings about the wisdom of that investment.
On 16 other occasions this year, ministers have issued similar “ministerial directions”, overriding their civil servants’ warnings about spending projects, compared to just three such directions issued during the entire 2010-15 coalition government.
This government’s spending reflects the personality of the prime minister himself. It is undisciplined, ill-thought-out, lacking in rigour or restraint, and too often focussed on tomorrow’s headlines rather than the country’s long-term economic interests.
Sunak, an economically literate grown-up, understands the gravity of the situation. He knows a terrible reckoning lies ahead, and that some very painful and unpopular decisions will be necessary. Apart from obstructing Marcus Rashford’s campaign for free school meals, our overgrown schoolboy of a Prime Minister evidently does not.
Johnson rules out a return to austerity. He defends the “tax lock” on VAT, national insurance and income tax, and the “triple lock” on state pensions. He recoils from raising the capital gains tax – a move Tories would hate. Famously indecisive, he has to date accepted only a freeze on public sector pay, and cuts to the relatively soft target of foreign aid. He may lead what was traditionally the party of fiscal rectitude, but continues to believe he can have his cake and eat it.
Although Sunak’s line about taking Johnson’s credit card sounded like a joke, it could well portend a seismic clash between two men with radically different outlooks on the responsibilities of government.