Chancellor Rishi Sunak today delivered a Winter Economy Plan which will almost certainly have served to enhance his standing among Tory MPs, and entrench his position as the front-runner to replace Boris Johnson.
In a serious, substantial speech without any obvious attempt to overpromise Government action or sugar-coat the picture, Sunak opted to level with the House of Commons about the situation the economy faced. His language described a shift in strategic focus; in March the Government envisaged a crisis that might burn out by Christmas, and so attempted to put the economy on ice until the end of the year and offer support to sustain businesses and jobs until then.
Now, it is clear instead that the crisis will last for a much longer period of time, and will have a permanent impact on the economy. The Treasury is therefore now in the business of offering support in the transition to ‘the new normal’.
Politically, the statement met an urgent need. The government were already under pressure to set out what they were doing to support, particularly, the hospitality and tourism sectors after the October end of the furlough scheme.
Following the Prime Minister’s announcement of the new restrictions earlier this week, Government action here started to look inevitable, given the furious responses of the Conservative Parliamentary Party and the hospitality sector, in particular.
The centrepiece - the new Jobs Support Scheme - therefore feels like a sensible middle ground between the calls from the opposition, some businesses and the unions for an extension of the furlough scheme, and the concerns of economists and the Treasury that the furlough in its original form restricts labour market flexibility by offering limited incentives for people to look for different jobs and represents a huge deadweight cost - with many of those currently on furlough likely to end up on Universal Credit. As the Chancellor said, it is ‘fundamentally wrong to hold people in jobs which only exist in the furlough scheme’.
The Chancellor’s statement was only put on the order paper at the beginning of the week. However, it looks very much like this had clearly been planned for a while - so much so that Sunak was able to pose outside No11 with a New Labour-style colourfully-bound document and both the heads of the CBI and TUC - surely a coup for a Tory chancellor. This speaks to the level of planning and stakeholder engagement that the Treasury had been able to do, and suggests the package had been largely settled by the weekend.
Given the extent to which Treasury deliberations have been leaked of late, that this had not come out in advance is remarkable. But the apparent sequencing - the Chancellor responding to a further set of problems created by the restrictions announced by his neighbour in No10 - is clearly to Sunak’s advantage.
The Winter Plan will not be the last time this year we hear from Sunak in such circumstances. It comes instead of a Budget, which was cancelled due to the uncertain times. However, as the Government is currently only budgeted until the end of this financial year, we have the inevitability of a further set-piece - a spending review (albeit one likely covering only one year), with which Sunak can further burnish his reputation.