IT is somewhat astounding that Rishi Sunak – whose huge misjudgement of how long coronavirus furlough support would be needed forced him into a necessary but massive and surely humiliating U-turn – is portrayed these days as a safe pair of hands.
Of course, everything is relative.
And Mr Sunak’s arrival at 10 Downing Street follows a spectacularly turbulent period for the divided Conservative Party, with Liz Truss’s short spell in charge having seen sterling and gilt market crises which required massive intervention from the Bank of England.
However, it is crucial at this most perilous of economic times not to judge Mr Sunak against Ms Truss or for that matter against former chancellor Kwasi Kwarteng, whose mini-Budget on September 23 unleashed such mayhem, but on his own track record.
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It is also important to remember that much of the messaging about Mr Sunak somehow having the deep experience required to extract the UK from an economic crisis is coming from his supporters within the Conservative Party and some sections of the media in tune with the new Prime Minister’s ideology.
We should, of course, also bear in mind that the Conservatives, including Mr Sunak, have had a major hand in the economic trouble in which the UK finds itself.
Mr Sunak was chancellor from February 13, 2020 to July 5, 2022. That is nearly two-and-a-half years. So any notion of him as a new broom in Downing Street is beyond bizarre.
He seemed to be a firm believer in the UK’s hard Brexit and subsequent detrimental clampdown on immigration from European Economic Area countries, something which has fuelled labour and skills shortages which continue to cause such great difficulties for businesses in Scotland and other parts of the UK.
The plunge in sterling, a very significant part of which appears to have been caused by Brexit, has driven up the cost of imports, from food to engineering components, and fuelled inflation generally, creating trouble for households and businesses. The pound dropped very sharply, from levels close to $1.50, in the immediate wake of the June 2016 referendum result becoming clear and was last night trading below $1.16.
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It seems at times that some of the positive sentiment towards Mr Sunak is driven by the UK taxpayer-funded coronavirus job retention or furlough scheme.
However, he did not cover himself in glory in this regard.
France and Germany moved swiftly as the pandemic emerged to put in place furlough support lasting years rather than months, providing crucial certainty.
Mr Sunak, in contrast, seemed impatient to end the furlough scheme almost as soon as it had begun.
His lack of foresight on the need for the furlough scheme to continue for a long time, rather than a matter of months, was so spectacular because what was actually required was so obvious. Plenty of people attempted to put Mr Sunak right on the issue but he refused to listen all the way to the point when reality caught up with him. His U-turn was performed chaotically, in stages, and it would surely be difficult to argue he did not create protracted and colossal uncertainty for employers and furloughed staff alike.
Ultimately the scheme, launched in March 2020, lasted until September 2021.
The across-the-board ending of furlough support at this point was, of course, still premature. And many understandably pointed the finger at the UK Government’s ill-timed withdrawal of furlough support, with no replacement, for fuelling the staff shortages which wreaked so much havoc as international travel reopened. Mr Sunak had been warned about the impact of ending furlough support for the key international travel sector months before it was able to reopen fully but again he did not listen.
Not listening seems to be something of a habit for him, and that does not bode well at all as he prepares to make major decisions that will have a huge impact on households and businesses.
He continued to insist through the autumn of 2020 that the furlough scheme would not be extended beyond October 31 that year, even as the second wave of coronavirus built.
The second wave was widely anticipated, of course, and was clear in any case from summer 2020. It is difficult to overstate the scale of Mr Sunak’s misjudgement, which caused not only enormous but also entirely unnecessary uncertainty for households and businesses.
Mr Sunak does deserve credit for one thing – his decision to raise the main rate of corporation tax from 19 per cent to 25% from next April. This move, announced in Mr Sunak’s March 2021 Budget, was briefly reversed by Mr Kwarteng, then subsequently reinstated. This is a big money-raising measure, which the UK Government estimated earlier this month would bring in around £18 billion a year. And it will almost certainly not affect growth in any meaningful way, given the huge reduction in corporation tax under the Tories previously failed spectacularly to foster investment or expansion.
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It is difficult, however, to remember any other positives at all during Mr Sunak’s period as chancellor.
In contrast, many negatives spring to mind immediately.
So when people listen to Mr Sunak’s polished performances, it is crucial to dissect his words and take a good look at what lies beneath the spin. It is also very important indeed to bear in mind his track record to date when assessing whether or not he is the person to extract the UK from a crisis which is much of the Tories’ own making.
At this juncture, it is also absolutely vital not to be taken in by the Tory portrayals of the degree of the crisis and what is supposedly required to solve it. These portrayals should most certainly not be taken at face value, given the likely agenda behind them.
It feels in many ways as if we are back in 2010, at the point when the Tories embarked on a savage and counter-productive austerity programme involving many billions of pounds a year of welfare cuts as well as public sector pay freezes and caps.
Those in power have a responsibility to remember the lessons from this. Sadly, this is unlikely because the ruling Tories refuse to acknowledge the lessons and, even if they do privately, they have shown absolutely no indication of modifying their future behaviour or moderating their ideology in response.
What we learned last time round is that austerity aimed at millions of ordinary households and focused most sharply on those on the lowest incomes and in the most difficult situations is exactly the wrong thing to do, from the perspective of the economy and the public finances as well as society. Public sector net debt surged under the Conservatives from around £1 trillion in 2010 to £1.8 trillion just before the pandemic hit, as a result of their ill-judged economic policies.
Even though the lessons should be fresh in everyone’s memory, however, it seems we are about to be dragged down the same blind alley again by Mr Sunak and his Cabinet.
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