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22 October 2020

Why Rishi Sunak’s most painful U-turn is the fault of George Osborne

The Chancellor’s biggest policy and political defeat is a result of the introduction of metro mayors outside of London.

By Stephen Bush

In the biggest setback so far in his short and glittering career, today Rishi Sunak made a U-turn on practically everything. He overhauled his job support scheme for businesses that are still open, transforming it from a scheme that incentivises businesses not to use it to one where the government will pay the wages of a much larger chunk of the workforce in businesses across the country. He has slashed the required employer contribution to wages from a third to just 5 per cent and extended his programme of grants to businesses in tier two areas.

While the plans announced today are less generous than those he revealed in March, they are many orders of magnitude more generous than the plan he first put forward to replace the original furlough scheme.

His defeat has multiple authors: nervous Conservative MPs in marginal seats (the government’s deservedly maligned parliamentary operation has sharpened up considerably in recent weeks, and No 10 is more responsive to back-bench unease than it has been in the past), the metro mayors (Andy Burnham, the most experienced political operator, has taken the headlines, but the quiet and effective lobbying of Andy Street, his Conservative West Midlands counterpart, has also been a factor), and, of course, the official opposition.

[see also: Andy Burnham spoke the language of class struggle – Labour must follow]

But it’s the shadow chancellor, Anneliese Dodds, who got to take the victory lap in the Commons today, which she did in her most confident and fluent parliamentary performance yet. She derided Sunak for having implicitly accepted the criticisms she made of his original plan.

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The Chancellor’s discomfort takes two forms. The first is political: no one likes having to admit that they have torn up pretty much all of their plans, particularly when doing so allows their opposition counterpart to take credit. But the policy headache is bigger: the Chancellor’s priority has been to reduce the amount the government is spending on business support, but he has now been forced to increase it. And once the indirect economic consequences of the lockdown begin to be felt in tier one areas, it is difficult to see how he will be able to avoid a further extension of grants. 

The largest single piece of forced expenditure today came thanks to the metro mayors. While tier two restrictions are new for London and for the West Midlands Combined Authority (at least as far as their implications for hospitality and leisure businesses), they are not new for Greater Manchester. Burnham’s energetic lobbying, and the political risk of gifting him the argument that the problems with tier two were only addressed when London experienced them, has meant that these new measures will also be applied retroactively. That is going to be a difficult precedent to unpick when, as seems likely, more needs to be done for businesses in tier one areas.

There’s an irony here, in that part of Sunak’s appeal among his Tory supporters in parliament is that he is the truest heir to the Cameron-Osborne tradition: he is a fiscal hawk and a believer in free markets, a “deregulationist at heart” in the words of one admirer.

But his biggest policy and political defeat has been co-authored by the biggest constitutional legacy of the Cameron-Osborne era: the creation of metro mayors outside of London, designed to give a bigger voice and weight to England’s great cities, and doing exactly that: albeit not in a way that either Sunak or Osborne would wish.