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Johnson in the red corner, vs. Sunak in the blue corner, the budget battle has begun

Public Affairs

By Simon Gentry

Boris Johnson and Joe Biden may not agree on everything but on one thing they do:  They both love spending money, stupendous amounts of it, and all of it borrowed.  The money they are spending has interest attached and the capital will either have to be paid back or inflated away. Both will hurt. In the UK the government is focused on investing so that the country is ‘levelled up’, creating opportunities everywhere, not just in the South East.

But new infrastructure is not the only thing on the Prime Minister’s shopping list.  Hardly a week passes without an announcement of a new splurge of public money being spent somewhere.  Of course critics will always argue that its not enough or that its not being spent on them or their own pet projects, but the sums being promised are adding up and are beginning to worry Conservative MPs.  Borrowing to get the country through a global pandemic and the largest economic disruption since World War II is one thing, borrowing to spend on projects with uncertain rates of return is something else.

The Conservative party is, like the Labour party, the product of our first past the post, two party system in that both parties are coalitions.  There is never peace inside these organisations, the factions and ideological warriors are always jostling and competing so that their particular vision is presented to voters at the next election.

Boris Johnson and his faction won by in effect expelling the Remain wing of the party. The rest fell into line.  But that is history now and what we are seeing is the outline of his views of the state and its role in the economy and society.  It’s coming as something of a shock to many in his party.  Before Johnson the party was still intellectually framed by the Thatcherite thinking of the 1980s.  Of course, Margaret Thatcher faced different issues and challenges, but it is hard to see her resorting to borrowing on a massive scale as a means of driving economic vibrancy.

Rishi Sunak may have only been a Southampton school boy during Thatcher’s years in power, but he is perceived within the party as being much more traditional i.e. Thatcherite than Johnson and as such is reportedly alarmed by the endless spending announcements made by his neighbour in Number 10. In theory the Chancellor holds the government purse-strings, but in practice the process of agreeing what the government will spend is the result of careful negotiations between numbers 10 and 11 and between them and the rest of the Cabinet.

Johnson’s electoral success and buoyancy in the polls is, in part, because although he’s conservative on social issues (just like most voters), he’s behaving like a Labour Party government might on public spending (just like most voters).  Whilst it is true that the government is borrowing at next to nothing, it’s the principle that’s worrying many in his party.  They are looking to Sunak to see where he really stands on this issue.  That, they expect, will become visible in this autumn’s budget. 

That will be the time in which the Chancellor’s bid to succeed Johnson will begin but will also be the time when the shape of the modern Conservative Party will be forged.  We already know that we will not see a return to Cameron/Osborne-style austerity, but the Chancellor is worried about endless spending.  A balance will need to be negotiated.  Its shape will be known in November and it will shape our political discourse for years.