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13 October 2021updated 14 Oct 2021 9:48am

Boris Johnson’s perfect storm

The UK faces supply shortages, an energy crisis and a government at war with itself.

By Tim Ross

In early October, when Boris Johnson toured the drinks receptions at the Conservative Party conference in Manchester, he could hardly believe that what is usually a treacherous gathering of rivals and plotters was proving so trouble-free. Cheered everywhere he went by party members and lobbyists clutching chilled glasses of Bollinger, the Prime Minister joked that he might have to manufacture a row on the sidelines just to keep the press happy.

Even at the time, the celebrations amid the terracotta and marble grandeur of the Midland Hotel seemed oddly disconnected from the world outside. On the day that Johnson gave his joke-filled keynote speech to uproarious laughter in the conference hall, more than 5.5 million households suffered the biggest overnight cut to state benefits in history. In the run-up to conference, motorists across large parts of the country struggled to find petrol as filling stations ran dry. Soaring wholesale gas prices stoked anxiety for millions and forced a clutch of energy companies out of business. Alarmed by rising panic, officials quickly promised that there would be no power cuts this winter – an assurance that was startling for the very fact that it needed to be made at all.

With conference deemed a success, Johnson went on holiday to Spain. Then the UK’s energy crisis deepened as heavy industries warned that they were days from shutting down. “Now is not the time for a prime minister to be on holiday,” Gareth Stace, the head of UK Steel, an industry body, said. The premier must get to work and “bang ministerial heads together”. Tensions between ministers that had been held in check were pushed into the open. Allies of the Chancellor, Rishi Sunak, clashed with the Business Secretary, Kwasi Kwarteng, over who was to blame for the soaring gas prices that are threatening to force steelmaking and chemical plants to close.

Multiple crises are now combining to put unprecedented pressure on the economy and the institutions of the state: food supplies, factories, courts, farms, hospitals, restaurant chains and power grids are all being pushed towards breaking point. Parallels are being drawn with the 1970s, when daily life was blighted by blackouts and industrial action. For a few days in September 2021, an ageing Nottinghamshire coal-fired power station, which is due to close next year, was one of the last things keeping the lights on.

“There is no single argument to be made about what is happening, it’s a whole series of interconnected issues all at once,” one minister said. “It’s the perfect storm.”

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As they grapple with the fallout from Brexit and the pandemic, Johnson and his team are taking policy decisions they accept will cause pain for many people but insist are worth it for the longer term. On every front, Johnson faces a battle with members of his own party. His critics range from right-wingers who oppose state intervention in markets to MPs who fear the pain that savage welfare cuts will inflict on millions of voters in parts of the north and the Midlands that only recently converted to conservatism. Johnson chose to raise taxes to fund the health and social care sector from spring 2022. The money is desperately needed but the hike will tighten the squeeze on household incomes. Instead of lifting immigration rules to allow EU citizens to return to the UK permanently to work as lorry drivers or in the food sector, ministers want companies to fill their own labour shortages by paying British workers more, a process that may take years to complete.

As he prepares to convene the Cop26 climate summit in Glasgow, the Prime Minister is also on the point of announcing a sweeping plan to cut the UK’s carbon emissions, including measures that could hit consumers with higher costs. Inflation is already rising rapidly and the Bank of England is weighing up an increase in interest rates.

The sense of foreboding over the multiple pressure points has dominated discussions in Whitehall and Westminster as the autumn nights draw in, provoking hard questions for the country’s ruling politicians. Why has the UK ended up in such a situation, seemingly hit harder than other European countries? Is Brexit, the pandemic or ministerial incompetence to blame? Does Johnson have a plan? What happens if he fails?

Tall, slim and neatly presented in a business suit, Keith Anderson comes across as everything you would expect from the CEO of a major energy firm. That is, until he starts talking about the rise in gas prices creating chaos in the consumer energy market. “It was already a crisis, it was broken,” Anderson, the boss of ScottishPower, said. “There are businesses out there are who are not properly regulated, who pissed away consumers’ money and lost it down a big black hole.”

Gas prices have risen by 250 per cent since January, with a 70 per cent hike since August alone. The reasons are complex and the UK is not alone in experiencing difficulties. Gas and energy supplies have been squeezed around the world, partly due to a colder than average winter in Asia, as well as increased demand from countries lifting lockdowns. Some also suspect that Russia is restricting output, further inflating prices in Europe.

For Anderson, however, the failure of the market is primarily the fault of ministers and regulators. Companies that decided to hedge their supplies and fix purchase prices have been able to withstand the sudden rise in the price of gas. Smaller outfits, though, are now in trouble, with a growing number going out of business. Ultimately, it will be consumers who pay the price as the surviving firms are forced to take on the customers of companies that have gone bust. “That’s a disgrace,” Anderson said. The smaller businesses that couldn’t get the financing to hedge their supplies “shouldn’t have been in the market in the first place”, he added.

Officials have warned that average consumer bills could exceed £2,000 next year. But with international energy prices rocketing, there’s little the government can do beyond building more offshore windfarms and nuclear power stations, “but that’s going to take years”, one official said.

Later this month, Johnson will travel to Rome for the G20 summit, where he aims to persuade world leaders to make bolder ­commitments on climate action ahead of Cop26, which opens in Glasgow on 31 October. The UN climate summit is a chance for the world’s governments to pledge action to reduce global warming, as well as an opportunity for the UK to show leadership on the world stage after Brexit.

The Prime Minister must first decide how to cut the UK’s own carbon emissions and if he has the political space domestically to spell out what that will mean for families and businesses. The more detail he gives on the UK’s plan to reach net zero carbon emissions by 2050, the more pressure he will be able to exert on other countries to step up.

There is a radical strategy to decarbonise homes and commercial buildings, drafted in Whitehall and sitting on Johnson’s desk, awaiting his signature. But the blueprint will be politically controversial, if implemented in full. It has the potential to push up household energy bills even further thanks to new green levies, while hitting homeowners with the cost of fitting better insulation and cleaner heating systems as gas boilers are banned.

For Steve Baker, an influential Tory free marketeer who was a leading campaigner for Brexit, the problem isn’t too little government intervention, it’s too much. The choice for ministers is whether they want British people to be “prosperous and warm” or “poorer and colder”. The state, he says, has already stepped in to distort the energy market by imposing a consumer price cap along with levies designed to subsidise the development of solar and offshore wind farms. Fundamentally, for Baker, these are not policies the Conservatives should be enacting – they are, in his words, closer to “socialism”, a model that he argues never raises living standards for the poorest in society.

“In 2019, we secured one of the most solid and stable governments in western Europe, possibly the world,” Baker said. “Boris mustn’t now squander it.” As junior MPs in 2012, Tories such as Kwarteng, Liz Truss, Dominic Raab and Priti Patel backed radical free enterprise reforms in a book called Britannia Unchained. They are now all in the cabinet. “Are they going to do it or not?” Baker demands.

As for Johnson, if he is serious about levelling up and lifting the poorest in society out of poverty, “he needs to be getting government out of the way. And if that means swallowing a bit of pride at Cop26 then I’m afraid so be it. We are only 1 per cent of global emissions and we are not going to solve global warming by leaving the UK unable to produce steel, glass and ceramics.”

In recent weeks, the gas crisis has escalated, contaminating companies well beyond the power sector and leaving many in a fight for survival. Manufacturing enterprises including steelmakers, ceramics and paper producers, chemicals firms and glassmakers rely on intensive energy use. On 8 October executives from these sectors met Kwarteng for emergency talks, warning that some of their factories are “close to the edge” and may be forced to shut down within days. That would potentially cost thousands of jobs – in glassmaking, for example, once the furnaces cool down, they can’t be restarted and need to be replaced at a cost of tens of millions of pounds. Businesses would be likely to close.

Yet instead of agreeing a plan, Kwarteng became embroiled in an extraordinary public dispute with the Treasury. One ally of Kwarteng’s accused Sunak of “hiding behind” the Business Secretary after sending him out to face the fury of company bosses without any extra cash to offer. “All these companies are screaming for financial help,” the source said. “Kwasi is getting frustrated because he has been landed with the problem but he’s been given no money to deal with it.” One of the Chancellor’s allies hit back, saying it was Kwarteng’s job to meet businesses and come up with a plan, not Sunak’s.

On 10 October Kwarteng claimed in a series of broadcast interviews that he was in talks with Sunak over how to help the glassmakers and others. A Treasury official then briefed against the Business Secretary, accusing him of inventing stories on live television, in what instantly became headline news about government splits. The next day, with Johnson still on holiday, the Prime Minister’s spokesman intervened to calm matters, but the episode merely reinforced the impression of an administration in disarray.

“There is a sense of panic around government about all the effects of high gas prices – on energy intensive users as well as the cost on domestic consumers,” a senior Whitehall figure said. “It could get pretty bad. We have already got enough supply problems without steel or paper, or cement or other industries seizing up as well.”

With inflation forecast to reach 4 per cent, and a rise in interest rates expected, the squeeze on living standards is posing an acute political challenge for the Chancellor. Sunak will deliver a Budget and spending review on 27 October. The parade of business groups and MPs lining up to argue for government help is growing by the day.

“The biggest threat at the minute is the cost-of-living conversation,” said Ben Bradley, the Tory MP for the former Labour seat of Mansfield in Nottinghamshire. “The spending review is your chance to change things – you’d hope people don’t get hit in the pocket.”

The battle for Sunak is as much over the true meaning of Tory values as economics. Bradley, among other Conservatives, believes Sunak instinctively understands the need to cut taxes and to be a traditional low-spending Conservative chancellor. This approach makes sense to voters in Red Wall seats such as Mansfield. By contrast, Johnson is often seen as a prime minister who is happy to spend big on his pet projects, even if it means putting up tax. That makes the argument for a low-tax government even more important for politicians such as Bradley. At a time when the public is losing disposable income to inflation, raising taxes and bailing out failing companies is even harder to justify for many Tories.

As Christmas approaches, concerns are growing that the food supply chain will buckle. One in six people has been unable to buy essential food items in recent weeks, according to the Office for National Statistics. The ongoing shortage of HGV drivers, combined with high vacancy rates in the food processing sector, has led to speculation that rationing may be required to stop shortages, while meat producers say they are weeks behind schedule for the winter holidays.

The fundamental problem is a shortage of workers to process goods and then transport them by road. “Nobody wants to work in abattoirs,” said Zoe Davies, chief executive of the National Pig Association. Some 650 animals have already been culled on farms, with fears that many more will follow. “To feed, care, look after and nurture these animals, and then to have to throw them in the bin, is a complete waste.”

Companies including McDonald’s, Ikea and BP have all reported difficulties that have been blamed on the shortage of HGV drivers. Johnson’s critics say his Brexit immigration policy – effectively turning away lower-skilled EU migrants – has created a crisis for hauliers. In truth, there was already a shortage of HGV drivers, which the pandemic, more than anything else, made far worse. According to industry figures, an estimated 90,000 to 100,000 lorry driver positions are empty, causing delays to deliveries of food, goods, and fuel to filling stations – which caused panic buying and shortages at the petrol pumps. No 10 has offered 5,000 temporary visas for foreign HGV drivers. Even so, Johnson concedes it will take months or longer to transform the industry into a higher-wage business and attract younger British workers to fill the shortages causing so much disruption. “It will probably get worse before it gets better,” one minister said.

In Downing Street, jostling for priority alongside the cost-of-living squeeze and the rolling energy crisis is the unprecedented surge in demand on public services in the aftermath of the Covid lockdowns. The biggest task is to cut the backlog of 5.6 million delayed NHS procedures. The Crown Courts system, too, is overwhelmed, with more than 60,000 cases awaiting trial. The nightmare scenario haunting Tory aides who are planning Johnson’s next election campaign is of a failure to tackle the NHS backlog, combined with a shocking, nation-stopping crime (“another Sarah Everard”) being committed by a suspect who was awaiting trial because the system was clogged up.

More broadly for Johnson’s premiership, the deepening economic strife, with the spectre of rising inflation and stagnant productivity, could derail his manifesto plans for levelling up and investing in services such as the NHS and the police, according to Catherine Haddon from the Institute for Government. “This is a make or break moment for this premiership at this stage in the electoral cycle,” she said. It is not clear whether Johnson has a grip on the complex situation, or a plan to deal with the multiplying disruption, or is simply letting the news agenda dictate which crisis issue needs his attention next. It could add up to a grim winter for the public and the government alike.

“We have had lots of predictions of doom over the past year or so and they haven’t come to pass,” one member of the cabinet said, optimistically. “We’ll just have to hope this is another one.”

Additional reporting by Will Dunn

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This article appears in the 13 Oct 2021 issue of the New Statesman, Perfect Storm