(Bloomberg) — On a lazy Saturday afternoon, British prime minister Boris Johnson went to watch the rugby in the spring sunshine with his fiancee. The couple — who are expecting their first baby — beamed at each other and shook hands with the crowd as England beat Wales.
Their public display was intended to show life carrying on as normal — but there is nothing normal about the task facing Johnson now.
With his rookie finance minister Rishi Sunak, the premier is urgently rewriting his government’s first Budget against an unprecedentedly complex backdrop. Coronavirus has killed thousands and rocked markets around the world, and is threatening to cause havoc in the U.K. too.
At the same time, Johnson has given himself just three months to secure a breakthrough in negotiations on the U.K.’s future trade with the European Union, before he gives up and starts to prepare the country for no deal.
To make matters worse, Johnson’s own team has been rocked by a succession of personnel crises. Allegations of a culture of bullying have rendered parts of his government dysfunctional. Some observers question whether the 55-year-old Johnson — a comical television personality before he became a serious politician — is cut out to handle a crisis, as head of an inexperienced team.
“Boris Johnson and Rishi Sunak are now taking a series of decisions with uncertainty layered on uncertainty,” Paul Johnson, director of the Institute for Fiscal Studies, said in an interview. “There is a case for dealing with the short-run uncertainty over coronavirus now and leaving a lot of the bigger decisions for a bigger Budget in November.”
Sunak, 39, will have been Chancellor of the Exchequer for just 27 days when he delivers his first economic blueprint to Parliament at 12:30 p.m. on Wednesday.
It was meant to be the landmark moment when Johnson’s three month-old government unveiled its great vision, with ambitions for a massive increase in infrastructure spending to revive “left behind” regions. Immigration would be controlled, taxes capped or cut, and billions pumped into the National Health Service to secure 50,000 more nurses and 50 million extra appointments with family doctors.
As Johnson pressed on with his election mission to “get Brexit done and unleash Britain’s potential,” economists were billing the Budget as the most significant fiscal event in years.
Instead, Johnson’s original plans have been ripped up. The world economy faces its gravest threat since the 2008 financial crisis, an outlook that totally changed the context in which his government must now try to deliver on its election promises.
“It’s a huge task,” Sunak told the BBC on Sunday. “I am very well supported and we are working around the clock to make sure that whatever the scenario is, we are very well prepared.”
Johnson’s first Budget looks cursed. After he came to power in July 2019, his new chancellor Sajid Javid announced he would publish his first fiscal program on Nov. 6. That was scrapped at the height of the U.K.’s political chaos, as Johnson’s weak government failed to deliver Brexit on time. He eventually persuaded lawmakers to trigger an election and canceled the Budget.
When Johnson won a majority of 80 in that Dec. 12 vote, he suddenly had more power than any British leader since Tony Blair. Under the direction of his chief adviser Dominic Cummings, Johnson and his team set about using their muscle to revolutionize the way the government worked, taking central control over key policies, upending the way the media scrutinizes the administration, and in the process starting fights all over the political landscape.
Even Johnson’s previously warm relationship with President Donald Trump, which was expected to become even closer once the U.K. left the EU, has soured. Johnson’s decision to defy the U.S. and allow technology giant Huawei Technologies Co. into Britain’s next generation broadband networks infuriated Trump. The alliance has yet to recover.
In the U.K., a series of senior officials have left since Johnson took office, and two are now suing the government. One casualty of the infighting was the Budget, after the most spectacular public clash of all. On Feb. 13, Sunak’s predecessor quit during a face-to-face row with Johnson — in the middle of a cabinet reshuffle.
Johnson had demanded Javid fire all his advisers and hand full control over economic policy to the prime minister’s office. Javid refused and resigned, saying “no self-respecting minister” could agree to such subordinate terms. Johnson had not expected his chancellor to quit and turned instantly to Sunak, who accepted his brief to work as part of a single government economic team — reporting to him.
Boris Johnson Ambushed His Chancellor in a Quest for Control
In the chaotic aftermath of the blow-up with Javid, the Budget itself was thrown into doubt. Officials predicted it would need to be delayed. So too, the government’s greatly trumpeted “fiscal rules” — designed as a guarantee of budget responsibility — were suddenly under review.
The question was eventually settled, and the Budget was on the government’s diary for March 11. As soon as he took up residence in the chancellor’s office, however, Sunak found his Treasury officials had started to focus on the issue that would change everything: the coronavirus outbreak.
Two weeks ago it became clear to those inside the Treasury that the Budget itself would need to be rewritten to prepare the country for the worst.
Government officials insist the Budget will not overturn election pledges to cut taxes, to ready the country for life outside the EU, or to invest tens of billions of pounds in new infrastructure projects designed to “level up” the economy and help the poorer north of England close the gap with London and the wealthier Southeast.
But the detail of the commitment to rebuild Britain — a defining feature of Johnsonism — will have to wait, potentially for months. Officials feared Johnson’s 100 billion-pound ($130 billion) infrastructure strategy would have been overshadowed by a budget inevitably focused on the virus. So it was put on hold.
U.K. Delays Infrastructure Review Until After Budget
Sunak is now working on measures to help businesses survive the outbreak, to ensure people who are forced to take sick leave do not suffer financial hardship, to boost the country’s health care system with an army of 3 million volunteers, and to mitigate public panic — and avoid shortages in shops.
Sunak and Johnson are in contact with the Bank of England governor Mark Carney, who is just days away from leaving his post, over the wider economic response to the outbreak, and coordinated action seems likely.
On Sunday, Sunak hinted he could abandon the fiscal rules Johnson and Javid committed to during the election campaign. Under these restrictions, Johnson’s government has pledged to keep tax revenue and day-to-day spending on services such as schools and policing in balance within three years, and to borrow only for capital spending on infrastructure. But Sunak declined to say when asked repeatedly whether he will stick to the rules, given the need to spend now to fight the virus.
“Crucially our public finances are in a very strong position, which means I can sit here and tell you I’ll take whatever action is required,” Sunak told the BBC’s Andrew Marr Show.
What that action will be is still to be determined. Johnson knows he can’t afford to put off the big ticket spending he pledged in the election campaign. He has promised to repay voters who abandoned Labour, the main opposition party, and put their faith in the Tories and that only loaned him their support.
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The difficulty is if he puts off too many of his pledges, these voters won’t trust him again. But if he presses ahead with his popular announcements on cutting tax and investing in services in a Budget dominated by the virus crisis, they may not notice at all.
For Sunak, the crisis means late nights away from his family, holed up in his Treasury office, surviving on a diet of spicy chicken from Nandos, with hot sauce on his fries. In a government fighting on multiple fronts, it’s just as well Johnson’s new chancellor likes the heat.