Coronavirus recovery: Johnson has to square the circle between traditional Tory values and demands to tax and spend
Constituencies that turned blue at the last election are likely to bear the brunt of COVID-induced job losses.
The content of the article:
Another day, another announcement on job losses.
On Monday it was Pret A Manger‘s turn to announce layoffs as the food-to-go chain warned it would have to close 30 stores and lose “1,000-plus jobs” if sales of sandwiches and take-out soup don’t get back to at least half of their pre-coronavirus levels by September.
With turnover in its stores at a quarter of normal levels, Pret is burning through more than £20m a month.
Chancellor sets aside £3bn for green jobs
It is an all-too-familiar story in an economy that has been ravaged by coronavirus. Job losses in the coming months could enter the millions – levels not seen since the 1980s – as the economic fallout of the public health crisis hits our high streets, our hospitality industry, our manufacturing and aviation sectors.
Boris Johnson, pitching himself as a modern-day incarnation of the US President Franklin D Roosevelt, promised the British people he would “build, build, build” his way to economic recovery by effectively dusting down his 2019 manifesto and promising to accelerate £5bn worth of infrastructure schemes.
But on Wednesday, Chancellor Rishi Sunak will be more focused on the here and now as he announces measures to try to protect jobs and incentivise firms to take on younger workers.
“The aim is to put forward a package of measures to get us out of recession as fast as possible and help people’s jobs beyond the furlough scheme,” said one government insider.
That could mean a temporary cut to VAT for the hospitality sector in order to stoke demand and get people out spending as well as concrete support for apprenticeships and work programmes.
But there are also the beginnings of dividing lines between Labour and the government when it comes to economic recovery.
The dilemma for Boris Johnson is tension between his vision of Rooseveltian economic interventionism against the instincts of a party defined on principles of a small state and free markets, where the private sector fires the economy rather than the public purse.
These competing economic visions speak to a potential fault line running through his coalition of traditional Conservative heartlands and the old red wall seats.
“The areas that are going to be most hard hit by the job losses are going to be seats Boris Johnson won in the North East and the Midlands,” said one senior Labour figure. “These places risk the biggest spikes in unemployment because they are low-skilled jobs and more heavily focused on retail and a manufacturing base as well.
“There will be a tension between the Tory 2019 intake and the rest of the party – and not just on a philosophical basis but on a practical basis of constituency pressure.”
More spending, higher taxes on the wealthy, and more government borrowing – the priorities for Labour switchers are at odds with the more typical Conservative values of a small state, free market and low-tax economy.
“The party likes to have its cake and eat it,” observed one senior Tory on the right of the party. “This is a prime minister in favour of cakeism and that is the tension between a party that wants to spend lots of money and doesn’t want austerity because it is sick of it after 10 years but also wants a flourishing free market where we cut taxes.”
Andrea Leadsom, the former business secretary, speaks for many of her colleagues when she says the levels of government borrowing – the Office of Budget Responsibility’s most recent assessment in April put it at £298bn for 2020-21 – make her “uneasy”.
She said: “This is a massive amount of borrowing… we do need to keep international investors confident that the UK can fight our way out of it. Otherwise we’ll see borrowing costs going up and that is very difficult for the chancellor.”
It also helps explain why many Conservatives, including Ms Leadsom, are demanding the PM now wind down support schemes.
“I think it’s essential that we get businesses to stand on their own feet,” she said. “Again we’ve got to get the economy back up and running.
“Business owners need to think about the new normal and how they can make their businesses really motor again and start to be profitable.
“Otherwise we will inadvertently kill our economy with kindness. If we do too much, we make businesses dependent and they will fail.”
But the crisis has raised questions around state intervention and spending as the government intervened in the economy in ways that months ago would have been unacceptable.
Sir Lynton Crosby, the Conservative election strategist, told Sky News in a rare podcast interview that there will be a “battle” around the size of the state and who pays for what in light of these extraordinary interventions of recent months.
He said: “The government has just moved into a whole bunch of areas where it wasn’t before. The government is going into new territory and it’s spending and borrowing more.
“And it’s doing things that people would not have previously accepted and don’t necessarily see as a long-term solution. But I do think there’s a battle – you saw Jeremy Corbyn said he’d been vindicated by many of the things the government did in response to this crisis.
“But dealing with the crisis is the triage and then you have to get into the hospital and render the longer-term care and get the patient better. And even now in the UK only 41% of people think there should be more interventionist measures going forward, so people were prepared to recognise there needed to be these measures but it’s unsustainable.”
Beyond the debate around how big government should be, there is a question too over who foots the bill. Sir Lynton says voters believe that the ordinary taxpayers should not pay for it and instead want multinationals and the tech giants to pay more tax. “There’ll be a battle about who should pay for this.”
And this again speaks to tensions between the Conservative Party and new Conservative voters. Recent research found Tory voters have more in common with Labour on the economy than with Tory MPs and party members.
:: Listen to the Daily podcast on Apple Podcasts, Google Podcasts, Spotify, Spreaker
A report led by prominent academics for the UK In A Changing Europe think tank concluded: “The fact that Conservative MPs so strongly reject widespread perceptions of structural unfairness – far more strongly than grassroots Conservative Party members and activists – hints at the challenge the Johnson government will face if the shock of COVID-19 triggers public demand for economic redistribution and reform.”
It went on: “The Conservative Party won in 2010 and 2015 by insisting on the need for austerity and cuts that chimed with the views of MPs, activists and members on the role of the state, and made sense to a lot of voters.
“If, however, a sense that ‘there is one law for the rich and one for the poor’, and that ordinary people who have done nothing wrong are being let down by the government, begins to take hold, then the gap between Conservative Party people and voters as a whole could prove deeply problematic for the Johnson government.”
How much does Mr Johnson want to tax and spend? How does the chancellor intend to ensure public finances are sustainable?
Economists agree there is little point in trying to answer these questions now given that we still don’t know whether the UK economy will bounce back from COVID or crawl. The task for the coming weeks is to try to kickstart the recovery.
The task for the coming months and years ahead will be to define what Johnsonian economics really means, while also trying to hold together a new group of voters and a traditional Conservative Party which are poles apart when it comes to tax and spend.