JMore than a year ago, Rishi Sunak was a little-known young minister who played politics. The most important decision he made last summer, when he entered parliament four years earlier as a deputy for Richmond in North Yorkshire, was to write a letter.
Since you wrote to Times Newspaper supporting Boris Johnson to replace Theresa Mayo, 12 months ago, Britain has changed beyond recognition. The Covid-19 pandemic has inflicted the worst economic and public health emergency crisis in modern history, and now Sunak finds himself a key player in leading Britain toward recovery in the Johnson government.
On Wednesday, as Chancellor of the Exchequer, Sunak’s big decisions about the future of the economy will be outlined in a comprehensive update, designed to drive recovery as blockade controls are gradually eased.
To date, the chancellor at Westminster is seen to have had a “good crisis” after his rapid rise to fame, adding to his status as a new Tory star in unleashing multi-million dollar spending packages of which the occupants Labor of the n. ° 11 they would have been proud to call their own.
Transmitted to homes across the country at the start of the emergency in March, and promising to do “whatever it takes” to cushion the economic consequences of Covid-19, Sunak has played a pivotal role in the government’s struggle and has become a familiar name in the process. Dashing the Treasury’s usual reputation for fiscal rectitude, its interventions have injected £ 130 billion into emergency plans so far.
“I always used to say about the Treasury that we were the Millwall [football club] from government departments: everyone hated us and we don’t care. But you can see they did well during the Covid crisis, “Gus O’Donnell, former chief of civil service for David Cameron, Gordon Brown and Tony Blair, said last week.
Saying that the public probably trusted the chancellor more than many of his cabinet colleagues, O’Donnell said at an online event hosted by the Institute of Fiscal Studies expert group: “That will be tense as we move forward in a period of very rapid growth unemployment. “
Job losses are already starting to spiral as Britain falls into the deepest recession on record, while the Bank of England’s bleaker forecasts point to an unemployment rate of 9%, double the level before Covid hit. Three former chancellors, George Osborne, Philip Hammond and Alistair Darling, warned Sunak that he must prepare for the unemployment levels of the 1980s.
In this context, Sunak is preparing to liquidate the Treasury’s largest economic intervention, the license plan, which offers to pay companies up to 80% of workers’ wages, by the end of October.
Torsten Bell, director of the Resolution Foundation think tank, who was adviser to the Treasury under the last Labor government, says the chancellor’s job will be to fill in the gaps in Wednesday’s update.
With the tightening of tightening restrictions as Britain moves into a new phase of the Covid-19 crisis, Bell says questions about the government’s response are growing. “The answer so far is not enough, specifically, it is not enough in jobs and it is not enough to recognize the specific nature of this sector of this crisis, given the profound and lasting impacts on hospitality and leisure.”
Rather than continuing the licensing plan or supporting companies in specific sectors, Sunak is understood to favor easing pandemic restrictions and for companies to reopen as the best way to help revitalize the economy.
There are positive signs that the strategy could work. Last week Andy Haldane, the chief economist at the Bank of England, praised the UK’s economic recovery as faster than expected so far. “It’s the first days, but my reading of the evidence is so far away, so V,” he said last week, referring to the way that rapid rebounds in economic activity do when plotted on a graph.
Observers believe that boosting confidence rather than splattering tax and spending pledges could test the issue of the chancellor’s economic update, an extension of Boris Johnson’s “new deal” speech last week, which attempted to deliver a message from good taste.
The prime minister declared that austerity would not be at stake, while Sunak is expected to announce plans this week to support employment and growth to ensure that Johnson’s “guarantee of opportunity”, promised to all young people, becomes more than just a bite.
Some MPs have been alarmed by the cost of the licensing plan so far: the price is expected to hit £ 60 billion. They believe the scheme is unsustainable and only serves to preserve many jobs that are unlikely to exist after the crisis. They point to expectations that the government budget deficit will hit £ 300 billion this year: such a figure would far exceed the deficit incurred during the 2008 financial crisis. Public debt, the sum total of every budget deficit in history, has already it is worth more than the current size of the economy, reaching more than 100% of GDP for the first time since 1963.
But while some conservative MPs are pressuring the chancellor to provide a roadmap for dealing with debt, the costs of borrowing are currently so low that even doubling government debt would mean paying less interest than at almost any other time since 1950. .
Rupert Harrison, a BlackRock fund manager who was George Osborne’s chief economic adviser, believes it is best not to address the rise in loans during the early stages of the Covid-19 crisis. “The emphasis should be on supporting demand. We have not yet seen the worst of unemployment; We are not yet in the recovery phase, “he says.
However, Sunak could express its intention to tackle the debt mountain once the recovery is underway, giving it political cover for future tax increases or spending cuts, Harrison adds. “At some point in the future, when a recovery is underway, the focus should be on how we are going to stabilize the debt-to-GDP ratio.”
Far from a highly successful summer budget to get Britain back to work with a bang, in a barrage of “build, build, build” spending pledges, Sunak’s economic upgrade has been downplayed by government sources like a more discreet matter.
The chancellor is believed to prefer a “wait and see” approach to how the economy reacts to the lockdown, before using the fall budget as the main event for any radical changes in Treasury policy.
Workers, business groups and activists have warned that such a precaution could be costly, and called on Sunak to take swift action this week to avoid an economic catastrophe. Cutting the support too soon could stifle a recovery, while the risk of a second wave of Covid-19 infections remains.
If job losses increase dramatically as state support is cut, the Sunak star could decrease as fast as it has.
“What they were trying to do was build these bridges from one side of the closure to the other. And so far so good, ”says Karen Ward, a former adviser to Philip Hammond during his time as chancellor, who is now chief market strategist at JP Morgan Asset Management. “But what I’m looking for is making sure those bridges go directly to the other side. I’ve never seen a bridge that lasted three-quarters of the way that worked. “
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