That was quick. For much of his two-year run as Chancellor, Rishi Sunak has been a star. In January he was the only popular politician in the UK, bucking the near-universal trend for a politician to become more widely disliked as they become better known. In early February, at the height of partygate, he appeared to hold Boris Johnson’s fate in his hands — and decided not to act. This week, after one of the most widely-panned budgetary statements since George Osborne’s “omnishambles” in 2012, Sunak’s star appears to have finally fallen.
On Wednesday Sunak sat posed in the chamber as he waited for PMQs to end and his Spring Statement to begin. At first his precise manner — he sat ramrod straight against the bench, tapping his left index finger on his briefing folder, his head swivelling slightly to each speaker, with his left leg draped over his right, his shoes shined and neatly tied — seemed apt. But as he began to deliver his speech, in the same passionless tone he delivers all of his speeches, his precision started to feel overly programmed. Inside the chamber, however, the speech appeared to land ably enough: the cosmetic tax cuts Sunak announced were duly cheered by the Tory benches.
That apparent success soon unravelled. The accompanying Office for Budget Responsibility report was damning: Sunak’s Britain was, it wrote, heading for “the biggest fall in living standards since ONS records began in 1956”. Leading think tank experts were excoriating. “Those on benefits are really going to struggle,” said Paul Johnson of the Institute for Fiscal Studies. And the overnight papers were merciless (“No heat to eat,” declared the Metro’s splash). In a broadcast round the next day, Sunak’s smooth manner — so familiar to voters through the pandemic — was absent. He was tetchy, short with interviewers and unable or unwilling to charm them or the audience at home.
“If I might just have an opportunity to answer the question, that would be marvellous,” he snapped at Mishal Husain on the Today programme, regularly railroading her questions and sounding mildly exasperated that he had to explain the economy to an uninformed public (he peppered his answers with “obviously” and “actually”, words which implicitly condemn a listener’s ignorance). When Sky’s Jayne Secker later asked whether his wife’s company, Infosys, continues to operate in Russia, Sunak visibly panicked. He exhibited no ease or grace under fire. As a politician, he suddenly seemed unable to disarm anyone.
These grillings exposed how unusual the pandemic had been for Sunak. In a crisis, as John Kenneth Galbraith once put it, everyone is a communist. So it proved for Sunak, who assured MPs he was a low-tax Conservative but introduced the furlough scheme and quietly hiked taxes to a postwar high. That generosity won him national support, but the fiscal support he offered was not unusual across the West. The decisions he is making now are tougher — he has to disappoint someone, as his team stressed to the New Statesman — but Sunak appears to lack any unifying narrative that justifies his measures.
Part of the problem for the Chancellor is that there is no story he can explicitly tell: his aims, and his party’s demands, are too contradictory. At the 2019 general election the Tories overwhelmingly won the support of both low- and high-income voters. There is no part of the country Sunak can ignore: he has to satisfy both the southern landlord and the northern worker who “lent” their vote to the Tories in 2019. He has to cater to Tory MPs who want a bigger state and those who want lower taxes.
A sleight of hand is necessary. He needs to cut taxes on the surface and raise revenue in reality, as he sought to do this week. He cut fuel duty, announced plans to cut income tax in 2024, and raised the threshold at which people pay National Insurance from £9,600 to £12,570. But three prior decisions — hiking corporation tax rates, freezing income tax thresholds and raising National Insurance contributions by 1.25 percentage points — will bring in four times as much as this week’s tax cuts cost the Treasury.
If you believe in a bigger state, yet accept that Sunak must pacify Tory MPs and the party’s traditional base, that deception is actually welcome. The trick to running the Treasury is to raise as much revenue as you can while alienating as few voters as possible. Being explicit about your decisions can be the surest way to hamstring yourself. “It’s a way of paying for a bigger state. It’s quite clever [of Sunak],” Nick Macpherson, the permanent secretary at the Treasury from 2005 to 2016, tells me.
But such obfuscation leaves Sunak without much of a story to tell. It is not clear, in any case, that the Chancellor has a clear and compelling vision for the type of state he wants to craft in No 11.
The limits of Sunakism first became apparent a month ago, on the day that Russia invaded Ukraine. On that day — 24 February — Sunak descended upon the Bayes Business School, basked in the adulation of attentive students and appreciative academics, and promised to craft a state “built on a new culture of enterprise”. The hollowness of that aim — find me a chancellor who does not want such a culture — did not bear much comment at the time. Sunak’s star still shone bright, and the war in Ukraine soon eclipsed his paean to “capital, people, [and] ideas”.
But Sunak’s lecture was revealingly limited. It rested on an inane truism (“the best way to organise our economy is around free-market principles”) that remained banal despite the learned references to Adam Smith that succeeded it, before going on to state the UK’s economic problems rather than offering substantive solutions to them (“the most important thing we can do is rejuvenate our productivity”).
The lecture did contain the beginnings of an analysis. Compared with companies in Europe, British “businesses simply aren’t investing enough”, Sunak argued, as he committed to cutting taxes on business investment. And British employers “spend just half the European average on training their employees”, he added, promising to “reform the complexity and confusion” of vocational qualifications in the UK.
But such observations are the minutiae of meetings between policymakers. What Sunak lacked, both then and more glaringly this week, was a clarity of mission. By attempting to balance the books, fund the state and lower taxes when only two out of the three are possible Sunak risks satisfying no one.
His defenders in the party — and one temperate MP cautions against overreacting to Sunak’s “difficult week” — stress that 70 per cent of workers will pay less in National Insurance after the increase in the threshold, despite the increase in the headline rate. And Paul Johnson has pointed out that Sunak’s measures are progressive overall. The median worker’s post-tax earnings will fall by 1.6 per cent over the next year, but a better-paid worker on £42,000 will lose 2.4 per cent, and a worker on the national living wage should see their earnings rise slightly.
The owners of capital have once again been insulated from a national funding crisis, however. Capital gains tax did not rise and a cut in income tax will help rentiers, landlords and investors. For Macpherson, who helped to craft budget statements for three chancellors, there was a “failure of political imagination” in Sunak’s measures. “It’s all a bit disappointing,” he told me, with Sunak having rejected a windfall tax on oil and gas companies who have profited from record prices.
It is those on benefits who will suffer most, which appals Macpherson. A compassionate former Tory minister is also concerned but stresses that Sunak and successive British governments have focused on making work pay. Unemployment has been lower than expected after the pandemic, and “at a time of labour shortages”, Sunak is trying to incentivise work yet further (the gap between pay and benefits in the UK is already vast). Those in No 11 stress that the Chancellor “has always said he can’t do everything”.
But could Sunak have done more? Those on Universal Credit are losing 9 per cent of their income until benefits are increased in line with inflation later this year, pushing many into poverty. That poverty is, ultimately, a government choice. We could pay to prevent poverty, through higher taxes, more borrowing or a reallocation of the state’s revenues. Money can always be found. Sunak chose not to find it.