Comment

Johnson and Sunak must now be as one

It’s now more likely than not we’ll leave the EU without a free trade agreement

Cabinet meeting
Question marks still remain over how far Boris Johnson will back his chancellor Rishi Sunak at the upcoming budget Credit: Matt Dunham/AP POOL

Britain’s early post-Brexit years should mark the most intense period of policymaking since Thatcher. Combine that with “levelling up” – vital to Boris Johnson’s re-election prospects – and the UK’s reform agenda looks busier still.

The impact of this Covid lockdown, though, on our economy and broader society, points to even greater policy upheaval – equivalent, perhaps, to the years after 1945, the forging of Britain’s “New Jerusalem”.

Yet when it comes to the narrative thrust of policymaking, a sense of where the UK is heading and why, this government seems an ideas-free zone.

Johnson has a tough gig, of course. Some argue much of the economic fallout of Covid has been self-inflicted, given an overly stringent lockdown. I have some sympathy with that view. But with the global hub that is London, and a certain devolved parliament intent on incessant political games, managing Britain through this global pandemic was always going to be hard.

Plus, England in particular has been mismeasuring Covid cases, conflating “death from” and “death with” the virus. That’s overstated headline UK fatalities, creating an even more febrile political atmosphere.

And, rather than explaining complexities, while critiquing policy, our mainstream broadcasters have stoked fear and torn ministers to pieces at every opportunity, still smarting from the 2016 Brexit vote and last year’s general election.

As our political class returns to school, it’s worth remembering the fate of British governments hinges on relations between prime ministers and chancellors. A cliché, but it’s true.

Towards the end of last month, there were signs of a split. After Rishi Sunak, ahead of his November Budget, highlighted the sky-high cost of the “triple lock” protecting state pensions, No 10’s “concern” was briefed to the press. Such confidence-sapping nonsense must stop.

Over recent days, Johnson and Sunak have thankfully promoted a united fiscal message. Amid growing anger at the prospect of across-the-board tax rises, both men, in a series of briefings to Tory MPs, have vowed to keep taxes low.

The UK is heading for a 2020 budget deficit around £320bn, far bigger than after the 2008-09 financial crisis. Our national debt, given lockdown and related assistance measures, has soared above £2,000bn – going over 100pc of national income, a peacetime first.

Clearly, our public finances must be mended. If not, sterling is vulnerable and as the impact of quantitative easing on bond markets dulls, and borrowing costs rise, debt service costs could spiral.

Treasury mandarins, as ever, are pushing for sharp tax increases. That’s why Downing Street must state, loud and clear, that while clamping down on unnecessary spending and endemic public sector waste, the best way to tackle a ballooning debt-to-GDP ratio is to “raise the denominator” – growing our way out of trouble.

Johnson and Sunak must be as one, making hard choices on tax and spending where necessary. We’ll soon see if our Prime Minister is in office to be liked, or to do the right thing and lead. Is he “wet” or “dry”, in the vernacular of Eighties Conservatism? Soppy or sound?

There will be tough measures this autumn – as furloughing ends, and profligate spending is axed. But there can be no posturing – and Johnson is supposed to have created governance structures at the top of government to prevent that.

The Prime Minister must stand full square behind his Chancellor.

Rishi Sunak Boris Johnson leave 10 Downing Street, for a Cabinet meeting ahead of MPs returning to Westminster after the summer recess Credit:  Stefan Rousseau/PA

The two men must be similarly united when pushing through, in this November Budget and beyond, the tricky but vital supply side reforms – on planning, regulation, competition policy – that will genuinely unlock growth.

This is where their efforts should be focused. For it is imperative that this government, led from the top, presents a compelling economic vision – inspiring risk-taking, fresh investment and new employment, helping restore precious national confidence after the hammering of this ghastly pandemic.

There is talk this November Budget may not happen. Financial markets would be spooked, as when plcs delay audits, wondering if ministers can face reality. A Budget no-show would also be disastrous given that, just a few weeks later, the transition period ends, marking the UK’s full departure from the European Union.

It’s now more likely than not we’ll leave the EU without a free trade agreement. The Government knows this and, if there’s no FTA by early November, Johnson and Sunak should declare, unilaterally, Britain is leaving on that basis.

Trading with the EU on World Trade Organization terms is no disaster. The US and China sell hundreds of billions of dollars of exports to the EU each year on that basis. UK trade with the US – our biggest single-country trading partner – is on WTO terms, as is most trade across the globe.

Until then, Johnson should be stating daily why the EU’s negotiation position is so unreasonable – Britain merely wants the same treatment as nations like Canada, Norway and Japan. Michel Barnier’s “level playing field” – forcing us to follow even future changes to EU regulation – makes a mockery of sovereign status.

When France and others insist on continued deeply unfair access to UK fishing waters, that’s about much more than fish. Seizing permanent control over a country’s natural resources in return for trade access is akin to colonialism. And if the Tories fold on fishing, they won’t win a seat in the West Country for a decade. Nor in Scotland – which could break up the UK itself.

Instead of extending the uncertainty until late December, as the EU no doubt will, Britain should have the confidence to state, at the time of a November Budget by the very latest, we’re leaving with no FTA. Preparations can then be accelerated, helping businesses adapt.

When we’re fully out, and the political temperature has dropped, we can then negotiate on the EU trade pact both sides so obviously want some time in the future.

At the same time, Johnson needs to convey, with attitude, that while Brexit will initially be disruptive, it is above all an opportunity. So let’s hear about the freeports, the low-tax enterprise zones, the regulatory changes that leaving the EU makes possible and which will help get the British economy moving.

For all the knockabout of daily politics, it’s the narrative arc and related policy nitty-gritty that truly determine whether governments and countries succeed. So come on, Boris and Rishi – let’s hear your economic vision.

Follow Liam on Twitter @liamhalligan and listen to Planet Normal, his weekly podcast with fellow columnist, Allison Pearson here.