Tensions mount as Sunak and Johnson brace for fall spending battle
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When Tory MPs return from their summer vacation, they prepare for a big fight over public spending between Boris Johnson, whose instinct is to spend more and worry about the bill later, and Rishi Sunak, the self-proclaimed “fiscal curator” in the Treasury.
“There are two schools of thought,” said a minister. “One is that you are a 400 pound man and you should be losing weight; the other is that you’re a 400 pound man and one more burger won’t hurt. The chancellor is seen as being in the old camp. “Rishi will win,” added the minister.
There are already tensions between neighbors on Downing Street, from funding a £ 10bn plan to reform social care to Johnson’s seemingly trivial plan to order a new national yacht, which has gone up in price this month – from £ 150m to up to £ 250m.
The PM still hopes to build what Dominic Cummings, his former adviser, called “the dumbest tunnel in the world to Ireland”. Johnson also recently wanted to spend billions more on “remedial schooling” – according to government officials – but Sunak reduced the bill to 1.4 billion pounds.
Future battles weigh on the need to spend more on the NHS and the courts – helping repair damage from Covid-19 – and other transport programs. Johnson also needs more money for his “leveling up” program.
But Sunak worries about the prospect of rising inflation and interest rates, piling on UK service costs £ 2.2 billion debt, which hasn’t been that high since the early 1960s.
The Chancellor, who took to heart the mission of the Office for Budget Responsibility recent warning that the budgetary costs of higher interest rates are now six times higher than they were before the 2008-09 financial crisis, made it clear to Johnson that any additional spending above current plans will have to be paid for by higher taxes.
Tensions between the Prime Minister and the Chancellor are not new. “The prime minister always wants to spend more and the chancellor has a sacred duty to try to balance the books,” a senior Tory official said.
Downing Street officials say tensions are now minor over the bad blood that flowed between Johnson’s predecessor Theresa May and Philip Hammond or between the New Labor duo of Tony Blair and Gordon Brown.
“The Prime Minister and the Chancellor speak every day,” said a Treasury official. “They complement each other – they work well together.” Neutral observers in Whitehall confirm relations are far from fractured and Johnson still admires his Chancellor.
But recent events have sparked speculation that Sunak – backed by polls suggesting the Chancellor’s actions are increasing with conservative activists – is “on the move”, promoting her leadership credentials.
Treasury insiders were quick to blame Number 10 for the public relations disaster where Johnson and Sunak decided to participate in a ‘pilot program’ to avoid Covid self-isolation, before quickly pulling out.
Conservative activists took a dim view of the episode and also appeared to blame Johnson. His poll rating dropped 35 points in a CuratorHome poll this month, with a positive net approval rating of just over 3%. Sunak’s total is 74%.
Recently there have been reports in the media describing Sunak as a public spending hawk – very popular with many conservative activists – and push Johnson to reopen international travel. His collaborators deny being responsible for these stories.
The Chancellor is inclined to reject suggestions that it will require permanently higher public spending to cover long-term Covid vaccination programs, education and transport support, insisting that spending plans public funds are already generous.
While pencil budgets are more generous than in the austerity years of former Chancellor George Osborne, ministries grapple with the prospect of a withdrawal of Covid-related spending from spring 2022 and the fact that ‘much of the spending increases have already been allocated to the NHS even before any expansion of social care provision.
“There are more tensions now,” said a cabinet minister, adding that a “common economic unit” created by Cummings in February 2020 to join the think tank at numbers 10 and 11 Downing Street now mainly worked for Sunak.
Cummings is an admirer of Sunak, and the unit, led by Liam Booth-Smith, is ironically viewed by some in government as Cummings’ farewell gift to the new Chancellor.
Although the unit – and the eight special political advisers attached to it – theoretically respond to Johnson and Sunak, a veteran of the Treasury said: “Rishi made it clear that they were his spads. [advisers]. ”
Backed by the might of the official Treasury machine and this platoon of political advisers, Sunak is well equipped to push back spending proposals coming from Number 10.
Some at No.10 were hoping Dan Rosenfield, a former Treasury official now working as Johnson’s chief of staff, would be able to stand up to his old department. But an insider said: “It didn’t really happen.”
The Sunak team insisted that the “common economic unit” was more of a “title for a way of working” to demonstrate that Johnson and Sunak had a common agenda. “Nothing has changed,” said a Sunak ally. “All spads are employed by and are working for the pleasure of the PM.”
Jill Rutter, a senior researcher at the Institute for Government think tank, said the real test of Johnson and Sunak’s relationship will come in the fall, when big spending decisions need to be made.
“Looking from the outside, number 10 is too weak and doesn’t have enough clarity on what it wants,” she said.