With less than a fortnight to go before Rishi Sunak’s budget, the message from the Treasury is, “don’t expect fireworks”. There have been pyrotechnics aplenty offstage, however, as the chancellor tries to hold the line against big-spending colleagues – not least the prime minister himself.
After a spat with Kwasi Kwarteng burst into the open last weekend over backing for businesses hit by the energy crisis, with a Treasury source effectively accusing the business secretary of lying, Boris Johnson weighed in on Kwarteng’s side from his Marbella bolthole.
While this was an unusually public row – and remains unresolved, with Treasury officials still casting a sceptical eye over bailout plans – senior Tories say it reflects continuing tension between Sunak and Johnson.
While Johnson tends to look to solve short-term political problems by splashing the cash, colleagues say Sunak sees himself as the guardian of the public purse – and has become increasingly concerned about the risks of inflation.
“Boris is fundamentally totally a political animal – that’s just what he is. Rishi is very diligent, incredibly hard-working, and he takes his role very, very seriously; and he looks at the current conditions, and he knows there are going to be difficult choices to make,” said one senior Conservative who knows both men well.
“There’s a frustration from him [Sunak] and more broadly in the Treasury that the rest of the cabinet have more of a ‘just keep spending and borrowing’ attitude, and he knows that is not sustainable.”
Colleagues say the two men get on well – one described their relationship as a “tag team”. But there are two overlapping factors driving tensions between them: different economic priorities and a different political endgame.
While Johnson repeatedly highlighted his desire to create a “high-wage, high-skill economy” at the Conservatives’ conference, Sunak has pointed to the risks of inflation if wage rises run ahead of productivity as the economy recovers.
Allies are clear that he sees higher wages as the outcome of decisions to invest more in skills and technology, not a quick fix. “I think what the prime minister was doing was stating an ambition and a vision – and sometimes in order to get the vision across it has to be very simple,” said one.
And while Sunak willingly signed off on unprecedented spending during the pandemic, including the extraordinary furlough scheme, which saw the state paying millions of workers’ wages, he has made clear he now wants the government to restore financial discipline.
He is a fiscal conservative not just because that is the chancellor’s role and his own political gut instinct, but also because that is what the Conservative party base wants to see and hear.
Few at Westminster doubt that the multimillionaire former hedge fund manager came into politics with the hope of being prime minister.
His personal brand is carefully burnished by a special adviser, Cass Horowitz, who helps with his slick social media output, including a recent video with a dramatic orchestral soundtrack hailing the success of the furlough scheme.
Yet Sunak’s popularity among the Tory grassroots has recently been eclipsed by that of the new foreign secretary, Liz Truss, whom some believe Johnson deliberately promoted as a rival.
The chancellor slipped from second place to fifth in the latest monthly poll by the website ConservativeHome of Conservative members – who will ultimately decide who succeeds Johnson.
That still put him a full 21 places ahead of the prime minister, but the slide could reflect Sunak’s role in signing off the increase in national insurance contributions announced last month.
Certainly he felt the need to stress at the party’s conference, among grumbles from members and MPs, that he still believed in low taxes – but not before insisting the public finances must be put on a sustainable footing.
The backbencher Steve Baker complained at the time the government was, “grinding miserably forward, doing Ed Miliband’s Labour policies. We’re hating every minute and trying to claim it’s Conservatism.”
At September’s Downing Street press conference to announce the historic national insurance contributions rise, Sunak’s body language was markedly less comfortable than that of Johnson and the health secretary, Sajid Javid.
Allies later confirmed that he would have preferred not to be increasing taxes at all but as Johnson’s chancellor, was yoked to the prime minister’s personal promise of “fixing” social care.
On other recent spending decisions, including overseas aid cuts and the £20-a-week reduction in universal credit, Sunak has asserted himself, in the face of profound concerns among colleagues at the consequences of his tough approach.
But he was evidently irked by Kwarteng’s plea for more cash for crisis-struck firms, and government insiders say he is also resisting a fresh splurge on preparing the UK for the transition to net zero, before the Cop26 summit.
Some are beginning to wonder how many times Sunak will be able to stomach being hauled towards more spending by Johnson, who is overwhelmingly focused on winning re-election, whatever the fiscal cost.
The prime minister reportedly mused about moving Sunak aside after the pair clashed back in the summer. But he would be a formidable backbench critic – and Johnson has already lost one chancellor, when Javid resigned last year rather than accept sharing his advisers with No 10.
An ally of Johnson said of the chancellor: “He’s very supportive of the prime minister and he’s a team player, but I think they both have very very frank conversations in private. Rishi’s no shrinking violet; he says his piece.”
Stewart Wood, a veteran of the Tony Blair-Gordon Brown governments says the tensions between Johnson and Sunak are familiar, but the chancellor will have to decide what he stands for. “The classic Treasury-No 10 dynamic is, No 10 have lots of things that they want to do that cost money, the Treasury says we can’t afford it.”
With Blair and Brown it was different, he says, because Brown not only saw himself as guardian of the purse-strings, but had a vision about how the money should be spent that clashed with the prime minister’s.
“He had other priorities. He said no in the name of some sort of agenda,” Lord Wood said. If Sunak saw himself as a future Tory leader, he suggested, he would need more to say than no. “He’s got to have an alternative. What does Rishi Sunak bring to the party?”Internet Explorer Channel Network