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Having spent most of his short career as chancellor being seen as the nice man who dishes out dosh, it was perhaps no surprise that Rishi Sunak sounded less sure-footed with the tough stuff.
Even as he lobbed some red meat towards Tory backbenchers on public sector pay today, he couldn’t bring himself to use the F-word: freeze. Instead, Sunak said pay rises for non-NHS staff will be “paused” next year.
“Pausing” a pay rise is a euphemism that will stick in the throat of the 1.3 million teaching assistants, school dinner ladies, hospital porters, police officers, soldiers. The pay freeze (George Osborne had no qualms using the F-word in 2010) will also likely apply to council staff like bin men and care workers. In short, that’s a fair chunk of the “key workers” that have kept the country running through the pandemic.
The chancellor did of course try to limit the impact, setting out a £250 rise for 2.1m public sector staff who earn less than the median wage of £24,000. Yet even that seemed undermined by a sleight of hand. When Yvette Cooper pointed out that with inflation forecast to be 2% next year, the £250 would still be a real terms cut, Sunak sidestepped the issue.
In fact, “pausing” appeared to be the overall theme for this spending review. He paused an expected change in the inflation measure that will mean rail commuters and student loans will cost more for more years. The chancellor also paused any progress on climate change (there was virtually nothing on the global emergency that will one day overshadow the covid emergency).
And in yet another red meat moment for Tory MPs, Sunak paused the UK’s commitment to spend 0.7% of its GDP on overseas aid. The cut to 0.5% is for one year, but it’s unclear when the pause in the legal requirement will be restarted, given the only guide was “when the fiscal situation allows”.
It’s worth saying that the whole point of the GDP measure on aid was precisely to allow it to go up and down according to the health of the economy. When times are hard, aid spending already goes down automatically. But Sunak opted to go further, with £4bn more in cuts to the world’s poorest. Why? So some Tory backbenchers could dress it up with a depressing “charity begins at home” meme, like a tawdry early Christmas present they believe voters want to take their minds off covid.
Unsurprisingly, instant opinion polls showed that “reducing foreign aid spending” (yeah that word “foreign” is loaded with meaning) was popular. YouGov put support at 66%, opposition at 16%, SavantaComRes had 61% to 13%. Yet no one in government has made the case that tying aid to growth has already reduced overseas spending.
The resignation of junior minister Liz Sugg was an indication that some Tories won’t support a cynical attempt to use overseas aid cuts as a political weapon. Sugg, who worked for David Cameron and knows all too well how slippery Boris Johnson can be, won’t have been surprised he broke his promise to the voters in the Tory manifesto to “maintain” the aid pledge.
Although the aid cut will need new legislation, it’s hard to see how the One Nation caucus of Tory moderates has enough numbers to stop it. Few will forget how the caucus rolled over on the issue of breaking international law in the Internal Market Bill. But as with that bill, the danger (as Tim Montgomerie pointed out) is that “under this PM, Britain is becoming a nation that doesn’t keep its word”.
What really exposed the cynicism of both Johnson and Sunak (he’s meant to be the “nice guy” remember) was the quid-pro-quo of the £4bn aid cut being matched by a £4bn “levelling up fund” aimed at Blue Wall seats. Mansfield MP Ben Bradley tweeted exactly this equation, referring to “areas of the UK that are most in need”.
The fact is that the £10 billion saved by Sunak from partially freezing public sector pay and cutting aid spending was dwarfed by the £394 billion being borrowed to fund all the extra spending. But politically the cuts were about “the feels”. The point was unwittingly underlined by a Treasury “factsheet” on levelling up, that said it was aimed at “helping people feel better off”.
That emphasis on feelings and identity is indeed a reminder that while Dominic Cummings may be gone, his playbook and philosophy remains key to the Johnson government. The “foreign” culture war, the focus on the Blue/Red Wall, the suggestion that the NHS is the only bit of the public services that anyone really likes, Cummingsism lives on.
Yet on Cummings’ other big legacy – Brexit – Sunak was totally, utterly silent. The OBR was however more forthcoming, pointing out that a no-deal outcome would delay a post-Covid economic recovery by a whole year. Even a negotiated free trade agreement will strip 4% from output, the watchdog estimates. But the chancellor, himself a Brexiteer, had no comment.
Speaking of covid, the OBR’s figures today showed the merit of at least one big pause of Sunak’s: his close-run-thing decision to delay ending furlough in October. The extension to spring 2021 will save 300,000 jobs, it found. But ending furlough in March will lead to a 800,000 rise in unemployment, and the new Restart scheme won’t fully kick in next year.
Sunak also paused any decision on continuing the Universal Credit uplift. Though many expect that to come in the New Year at some point (Marcus Rashford is hinting another campaign is on the way), he was not ready to commit to it today, perhaps because that wouldn’t follow the Cummings script.
The biggest pause of all, however, was on the one thing that Tory chancellors are supposed to do: balance the books. The OBR warned he will need to find £27bn of tax increases or spending cuts in coming years, and the IFS said that kind of cash can’t be found without ripping up Tory pledges on income tax, VAT or national insurance.
In the end, the only taxes Sunak was prepared to increase were not the government’s, but those of town halls. Yes, council tax was again the Treasury stealth tax of choice, with upto £1.9bn pencilled in for precept rises to fund social care. Rather than directly fund care of the elderly, he put the responsibility onto councils already weary of austerity.
But add in the rising costs of an ageing population and climate change, on top of the need to clear the enormous debt, and the chancellor is facing an almighty challenge. Inflict the pain too early and he risks choking off the recovery, inflict it too late and he gets very close to the next election. But whether he’s in No.11 or No.10 in coming years, Rishi Sunak can’t pause that big decision forever.